AIR FORCE INTERCONTINENTAL BALLISTIC HEARINGS BEFORE THE SUBCOMMITTEE OF THE EIGHTY-SEVENTH CONGRESS FIRST SESSION SUBCOMMITTEE ON MILITARY CONSTRUCTION ROBERT L. F. SIKES, Florida CHARLES RAPER JONAS, North Carolina FRANK SANDERS, Staff Assistant to the Subcommittee COMMITTEE ON APPROPRIATIONS CLARENCE CANNON, Missouri, Chairman GEORGE H. MAHON, Texas HUGH Q. ALEXANDER, North Carolina JOHN M. SLACK, JR., West Virginia JOHN TABER, New York H. CARL ANDERSEN, Minnesota FRANK T. BOW, Ohio CHARLES RAPER JONAS, North Carolina MELVIN R. LAIRD, Wisconsin ELFORD A. CEDERBERG, Michigan GLENARD P. LIPSCOMB, California JOHN J. RHODES, Arizona JOHN R. PILLION, New York PHIL WEAVER, Nebraska WILLIAM E. MINSHALL, Ohio ROBERT H. MICHEL, Illinois SILVIO O. CONTE, Massachusetts WILLIAM H. MILLIKEN, JR., Pennsylvania EARL WILSON, Indiana AIR FORCE INTERCONTINENTAL BALLISTIC MISSILE BASE CONSTRUCTION PROGRAM MONDAY, FEBRUARY 13, 1961. WITNESSES THOMAS D. MORRIS, ASSISTANT SECRETARY OF DEFENSE, INSTALLATIONS AND LOGISTICS HON. JOSEPH V. CHARYK, UNDER SECRETARY OF THE AIR FORCE ALLEN MCCONE, SPECIAL ASSISTANT FOR INSTALLATIONS LEWIS E. TURNER, SPECIAL ASSISTANT TO ASSISTANT SECRETARY OF THE AIR FORCE (FM) MAJ. GEN. A. M. MINTON, DIRECTOR OF CIVIL ENGINEERING, DEPUTY CHIEF OF STAFF, OPERATIONS MAJ. GEN. THOMAS P. GERRITY, COMMANDER, AIR MATERIEL BRIG. GEN. WILLIAM E. LEONLARD, DEPUTY COMMANDER, COL. CARLIN WHITESELL, CORPS OF ENGINEERS, BALLISTIC COL. R. P. YOUNG, DISTRICT ENGINEER, SPOKANE DISTRICT E. M. SELTZER, GENERAL COUNSEL, U.S. ARMY CORPS OF ENGI- H. C. BOSCHEN, PRESIDENT, RAYMOND INTERNATIONAL J. O. McCLARY, VICE PRESIDENT, MORRISON-KNUDSEN RALPH W. OLMSTEAD, H. K. FERGUSON EDGAR KAISER, PRESIDENT, KAISER INDUSTRIES THOMAS H. PAUL, VICE PRESIDENT, PETER KIEWETT, INC. F. E. CORNWALL, PRESIDENT, MACCO CORP. L. GARLAND EVERIST, PRESIDENT, WESTERN CONTRACTING CO. C. H. LEAVELL, PRESIDENT, C. H. LEAVELL CO. BURNETT ESTES, PRESIDENT INDEPENDENT CONTRACTORS & ENGINEERS PAUL HARDEMAN, PRESIDENT, PAUL HARDEMAN, INC. W. CORDES SNYDER, PRESIDENT, BLAW-KNOX CO. ALBERT S. REEVES, VICE PRESIDENT, UTAH MINING & CONSTRUCTION CO. W. E. NAUMANN, PRESIDENT, M. M. SUNDT CONSTRUCTION CO. SAM WALLACE, PRESIDENT, WALLACE PIPE CO. R. E. MacDONALD, PRESIDENT, MacDONALD CONSTRUCTION Co., FREDERICK CROWLEY, ATTORNEY AT LAW Mr. SHEPPARD. Gentlemen, I thank you for responding to my invitation to discuss with the committee for these several days the (1) ICBM base construction program of the Air Force. Any way you look at this program things are in a mess. There is no doubt but what some improvements have been made in the past several months. They have, however, been but a drop in the bucket. All too long this program has been characterized by failure of top-level management to exercise proper control of a complex construction program and by a growing rivalry between the Corps of Engineers and the Air Force, particularly those in engineering or quasi-engineering type activities. Some people think they can once more see a desire to establish a large engineering type activity within the Air Force. This essential program has also been marked by an instability in design, as attested to by numerous and costly change orders unheralded to my knowledge in any construction program. This all adds up to a sloppy job which is costing a great deal more than expected, and is apparently destroying any realistic pricings in the coming MINUTEMAN program. I have called you gentlemen here today as the top men in this field and those vested with responsibility for making this a successful military construction program. You know the problems, maybe you know some of the solutions. I want the discussion on the point of the contractors to be frank, free, and open, with no information whatsoever being withheld from the committee. You may be assured that the Government personnel will hear them and you will be given ample opportunity to discuss any statements made. We have only a short period of time for these discussions so I do not want any extraneous matter or anything not pertinent to this construction program brought in. I do not want any beating around the bush in answering questions or any attempt to cover up or evade some of the problems or questions. Gentlemen, let's lay all the facts on the table and clean up this mess. The respective Government departments and services have been told to have personnel here who can speak with authority. The committee will expect you to respond accordingly. I would like to have all the subject matter pertinent to the hearing laid on the table. We have a very difficult situation to handle. We are all here for one purpose, to cooperate one with the other, to clean up a situation that needs cleaning up. As I stated, the respective governmental agencies have been told to have personnel present who can speak with authority, and I sincerely trust we have those people here this morning. The committee will ask you to respond to the testimony you are here to participate in. That is the problem we are confronted with. While I have not taken a lot of time to go into details, those are the things we expect to develop as we go along with the hearings. The first witness is a representative of the Raymond International Construction Co., Mr. Boschen, president. STATEMENT OF HENRY C. BOSCHEN, PRESIDENT, RAYMOND INTERNATIONAL, INC. Mr. BOSCHEN. I am Henry C. Boschen, president of Raymond International, Inc., of New York City, the sponsoring member of the joint venture consisting of Raymond International, Inc., of New York, N.Y.; Henry J. Kaiser Co., of Oakland, Calif.; Macco Corp., of Paramount, Calif.; Puget Sound Bridge & Dry Dock Co., of Seattle, Wash., all joined in a joint venture to construct the Atlas Missile Complex at Plattsburgh. I have with me a few sketches which give you a general idea of the project. I would be pleased to pass them to the committee if they would be of any value in following the remarks. This joint venture, on June 14, 1960, was awarded a contract in the amount of $24,408,000 for the construction of 12 missile launch complexes around Plattsburgh, N.Y. in the States of New York and Vermont. I am here today, gentlemen, to advise that our subcontractors, our component suppliers and ourselves have expended untold millions of our own funds to achieve the objective of this project. We cannot give you a precise figure for our subcontractors and component suppliers but we know their experience is similar to ours and our present out-of-pocket expenditure is in the neighborhood of $10 million above approved reimbursement with the project only 30 percent complete. Under present conditions this continues to increase and we have no way of knowing what ultimate expenditure will be required of us and our subcontractors. The plain facts are, gentlemen, we and our subcontractors cannot, nor should the Nation expect us to, continue to finance our country's defense program. At this point, gentlemen, I would like to make a statement that the comments and details which I am about to give are in no sense intended to be a criticism of anyone. We believe that the Air Force, the Army Engineers who are our clients on this project, and ourselves have been unintentionally trapped in a circumstance that neither of us, or none of us, have any power to control. The exotic character of the work that is being done on an experimental basis under military and wartime conditions of urgency, have removed all of the concepts that surround the construction contract. We are, we believe and I speak for the brick and mortar contractors and our subcontractors and suppliers-the only part of this program that operates under a fixed-price basis, and we have found that these holes in the ground have virtually become a bottomless pit and our funds are being poured into them seemingly without end and without any practical means we have yet found to achieve reimbursement that will be anything like the amount we need in order to avoid financial collapse. This, again, is not the fault of anyone within this group. It is merely the circumstances that has grown up in trying to accomplish this program. I am sure that the things which I am going to describe herein that have been forced on us by the managing agencies are not of their own intent, but merely the force of circumstances that surrounds the project. The solution of this inequity, which will be explained in detail, is the immediate and retroactive conversion to a cost-reimbursement |