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Colonel PERSON. I am not sure, sir; whether that original contract was awarded before we canceled the contract and then reinstated it. It may have been or may not have been, Lam not sure.

In other words, we originally authorized the work in September, canceled it in November, and reinstated it in December. Now that contract may have been awarded prior to our cancelation in November, and they may have simply canceled the contract and then reinstated the contract after we reauthorized the work.

I am not certain whether that was done or whether it was a brand-new contract. Mr. BURTON. Are the contractors the same?

Colonel Person. I don't know, sir. I don't know, as I say, whether they actually made a contract prior to our cancelation, or whether the contract was signed afterward.

Mr. BURTON. I am interested in determining just how these expense items, amounting to $50,545.05, were included in the lump-sum contract?

Colonel PERSON. Well, normally, particularly on equipment which is furnished by the Government; that is, purchased by the Government and then the value of the equipment is charged to the contractor, so that he pays the Government for the equipment and material which the Government furnishes

For example, in many cases, and throughout the contsruction program, we have immediately on having a job authorized, placed orders for the critical items of materials which we know are always late.

Then, having awarded a contract, those items are furnished by the Government, and the cost to the Government is deducted from the payments to the contractor. So that it has the same effect as though the contractor himself did the buying, which he really does from the Government.

Mr. Burton. Now these items making up the amount

Colonel PERSON (interposing). Incidentally, sir, I will have to add to that figure, the $194,876, an item of $5,506,48, which was the cost of Governmentfurnished kitchen equipment which was installed and not charged against the contract. That was in that letter, too. So you would have to add that $5,500 to the $194,000.

Mr. BURTON. In making a comparison with the Saunders Memorial Hospital it has to be considered that the hospital was equipped with kitchen utensils?

Colonel PERSON. Partially equipped. Mr, BURTON. These items making up the amount given, of $50,545.05, are a sprinkler system, a heating system, plumbing, electrical wiring, millwork, overhead and general expenses of contractor, architectural engineer cost based on 2 percent of estimated cost, all lumber-are those items such as would be furnished by the Government?

Colonel PERSON. Very possibly. Whether they were or not, as I say, I don't know, because I don't know whether they had this contract and the items were ordered by the contractor, or whether these were Government-purchased.

We have in many cases purchased and furnished the sprinkler systems and heating systems and things of that nature. Whether that was the case here, I frankly don't know.

Mr. BURTON. If these items, aggregating that total, were not included in the lump-sum price of $194,876, it would increase the cost of construction of that hospital considerably, would it not?

Colonel Person. Certainly. But with the exception of the item of architectural engineer costs, they were included.

Mr. BURTON. You can state that positively?

Colonel PERSON. Oh, yes, sir. I have a statement to that effect from the district engineer.

Mr. BURTON. That all of these other items were a part of the $194,876?

Colonel PERSON. Yes, sir; so I am informed by the district engineer, and I am sure that is correct.

Mr. BURTON. I submit at this point, and ask that it be spread on the record, & memorandum dated May 5, 1943, addressed to Mr. Julius H. Amberg, special assistant to the Secretary of War, signed by Tracy S. Voorhees, colonel, J. A. G. D., and I will read one short paragraph:

"1. With reference to your inquiry of May 3, the cost of the hospital equipment furnished by the Surgeon General for the Army Air Forces Hospital at Florence, S. C., according to estimates based on average prices as listed in the Medical Department Supply Catalog, is $54,039.51. "For the Surgeon General:

“TRACY S. VOORHEES, "Colonel, Judge Advocate General's Department.

per bed.

I ask that that be marked as an exhibit. (The memorandum referred to was marked as "Exhibit No. 1” of June 16, 1943.7

Mr. BURTON. I submit as an exhibit a memorandum dated April 16, 1943, to the Chief of Engineers, signed James J. Souder, captain, Saaitary Corps, assistant, transmitting a list of hospital equipment for the hospital which was constructed at the Florence Army Air Base, Florence, S. C.

Mr. DURHAM. Without objection, it will be admitted,

(The memorandum referred to was marked as "Exhibit No. 2" of June 16, 1943.)

Mr. Burton. To recapitulate expenses incident to the construction and equipment of the hospital which was constructed, there was $194,876 for the lump-sum contract; $5,506.48 for the kitchen equipment; $54,039.51 for the hospital equipment-which gives a total of $253,915 as the total cost of constructing and equipping the hospital.

Colonel PERSON. I should make it clear there, sir, that that is the construction cost. Of course, there were expenses incurred in overhead and administration which would have been incurred whether the new construction was carried on or whether the reconstruction of the Saunders Memorial Hospital was carried on. So in comparing the costs, we did not consider the overhead and administrative expenses.

Mr. Burton. According to the figures which have been submitted, the cost per bed for the Saunders Memorial Hospital, upon a leased basis, and considering 60 beds, would have been $2,366; and on the basis of the figures submitted for the hospital which was constructed, on the basis of 85 beds, the cost has been $3,105

Colonel Person. Well now, you are including in that the total fifty-some-oddthousand dollars reported by the Surgeon General as being the cost of the hospital equipment in the new construction, and including nothing for equipment for the old hospital; isn't that correct?

Mr. BURTON. That is true.

Colonel PERSON. I believe that that is not entirely the case. In other words, the hospital was, of course, partially equipped as a civilian hospital, but may I refer to this list in exhibit 2. It includes—if this is what comprises the $54,000 figure—there are very many items in here, such as bandages and oil; petrolatum; ferrous sulfate and acid sulfuric; aromatic, U. S. P., and so forth, which I think almost certainly would have had to be provided in Saunders; and I understand that there would have been some amount-I don't know what amount of additional hospital equipment furnished by the Surgeon General.

So there is an intangible or an indeterminate figure in between those two, representing the amount of additional equipment which would have had to be provided for the Saunders.

(Discussion off the record.)

Mr. Burton. I think it appropriate at this point to submit a copy of a memorandum dated February 6, 1943, for the Chief of Air Staff, signed by David N. W. Grant, brigadier general, A. U. S., Air Surgeon; subject, Change in Procedure for Acquisition of Army Air Forces Hospitals.

I would like to read the portion of this memorandum referring to the Saunders Memorial Hospital at Florence:

"1. The present procedure for the acquisition and development of hospital facilities for the Army Air Forces causes considerable unnecessary delay which can be avoided by simplifying and streamlining it. It is a matter of vital importance that there be no delay in these matters. There are numerous instances of delay due to the existing procedure. A few of these instances are cited, in each of which the cause of the delay is clearly indicated:

“(a) On October 15, 1942, recommendations were made to acquire the Saunders Memorial Hospital at Florence, S. C., with complete hospital equipment existing in the Saunders Hospital, in lieu of the construction of a cantonment-type hospital. The Surgeon General gave his concurrence on October 23, 1942. Base services requested necessary action of the Chief of Engineers to acquire this property on November 1, 1942. The Air Surgeon was not advised of subsequent recommended changes which increased the cost of conversion and acquisition to estimates considered prohibitive over the owner's quotation of a lease at $10,000 to $15,000 per annum. On December 16, 1942, cancelation was made of the recommendation for the acquisition of the Sounders Hospital, and the construction of a cantonment-type hospital was authorized without consulting the Air Surgeon as to the necessity for the conversions which increased the cost. There are still no mzuper hospital facilities at Florence Army Air Base, and there will be none until

much time as hospital under construction is ready for use. It is believed that an unnecessary delay of 3 months has resulted.”

Mr. DURHAM. When were these men, the personnel, put there at Florence, 8. C.?

Colonel PERSON. They came in during the winter. The maximum number actually stationed in Florence prior to completion of the hospital for use was 600.

Mr. Durham. Did they have any hospital service at all in the meantime? Colonel PERSON. Yes, sir; they had rented some facilities in town for such minor treatment as might be necessary, and they were roughly somewhere between 80 or 40 miles from the nearest airfield which had an existing complete station hospital. So that there was actually no hardship experienced as a result of any alleged delay.

Incidentally, sir, I would like to state that the Army Air Forces were fully cognizant of the fact that the acquisition was to be canceled, because we recommended to them that we proceed with the construction and they came back and asked us to do so.

Now where the Air Surgeon got lost in the shuffle and didn't know about it, I don't know.

Mr. BURTON. I would like to have the memorandum from which I just read, marked as an exhibit.

Mr. Durham. Without objection, it may be admitted.
(The memorandum referred to was marked as "Exhibit No. 3" of June 16, 1943.)
Mr. Durham. Do you have any questions?
Mr. SIKES. I believe not.
Mr. Durham. Do you have any further questions, Mr. Burton?

Mr. Burton. I haven't any further questions. I think we have got about everything in that we need.

Mr. Durham. Thank you, Colonel, for coming down.
Colonel PERSON. Thank you, sir.
Mr. DURHAM. This committee will stand adjourned subject to call.
(Whereupon, at 11:40 a. m. the committee was adjourned, subject to call.)

WAR DEPARTMENT,

Washington, June 22, 1943. Hon, Dan R. McGEHEE, Chairman, Committee on Claims,

House of Representatives, Washington, D. C. DEAR MR. McGEHEE: The War Department is opposed to the enactment of H. R. 1737, a bill for the relief of Saunders Memorial Hospital in the amount of $37,550, which you transmitted to the War Department under date of March 1, 1943, with a request for information and the views of the Department relative thereto.

Under the provisions of H. R. 1737 the Secretary of the Treasury is authorized and directed to pay, out of any money in the Treasury not otherwise appropriated, to the Saunders Memorial Hospital, Florence, 8. C., the sum of $37,550 in full settlement of all claims against the United States on account of losses sustained by the Saunders Memorial Hospital as a result of the failure of the United States Army Engineer Corps to carry out the terms of a lease of the hospital to the United States for the duration of the present war and 6 months thereafter.

The papers furnished with this report show that on October 14, 1942, Dr. John D. Smyser, medical director and superintendent of Saunders Memorial Hospital, Florence, 8. C., addressed a letter to the Headquarters, Army Air Forces, Washington, D. C., stating that he had been contacted by an officer of the Sanitary Corps relative to the availability of the establishment for use as an Army Asr Forces hospital and that he was desirous of cooperating by leasing the real and physical, properties intact” for use as an Army Air Forces hospital for the duration

By communication dated November 1, 1942, the Commanding General, Army Air Forces, requested the Chief of Engineers to take action to acquire Saunders Memorial Hospital, with all equipment, for use as a station hospital for the Army Air Base at Florence, s. c. Thereupon, the Office of the Chief of Engineers directed the United States Division Engineer, South Atlantic Division, to make an immediate gross appraisal of the hospital.

On November 16, 1942, Dr. Smyser called at the Office of the Chief of Engineers, and on that date, executed an option to lease the Saunders Memorial Hospital on bebalf of the board of Trustees of that hospital. The option covered

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all of the facilities and property of the Saunders Memorial IIospital, except certain personal property of Dr. Conyser and of three other doctors. It provided that should the Government decide to exercise the option and to accept the offer to lease, written notice of such acceptance should be given to the hospital at least 10 days before the proposed date of occupancy, the Government being granted the right to occupy the premises at any time after the expiration of 10 days from the receipt of notice of acceptance of the option. The rental to be reserved in any lease made if the option was exercised was at the rate of $10,000 per annum, the term to commence as of the date of occupancy by the Government and to expire June 30, 1943, subject to successive annual renewals by the Government for the duration of the present national emergency and 6 months thereafter, and to the right of termination by the Government at any time upon 30 days notice in writing.

By teletype message dated December 2, 1942,' the division engineer advised the Office of the Chief of Engineers that the appraised value of the property was $204,500, that the estimated cost of alterations to meet War Department requirements was $87,000, and recommended that the hospital not be acquired. By communication dated December 9, 1913, the division engineer submitted a report to the Office of the Chief of Engineers, indicating that the estimate of the cost of alterations required to render the property suitable for use by the War Department, as compared with the cost of new constriction originally authorized at the air base, was unfavorable to the Government. The report further indicated that the Saunders Memorial Hospital could only be made suitable for use as a 60-bed hospital, whereas an 85-bed hospital was required. It was further shown that the total cost of rehabilitation of the Saunders Memorial Hospital for the purposes of the War Department would be $91,838, and that this, added to the cost of the acquisition based on the gross appraisal of the property at $245,000 would bring the total cost of acquisition and rehabilitation of the Saunders Memorial Hospital to $336,838, or a unit cost per bed of $5,616.63. On the other hand, the estimated cost of new construction of a 115-bed hospital on Governmentowned land at the air base would total $196,815.92, or a unit cost per bed of $1,711.49. The Saunders Memorial Hospital is located some distance from the air base, whereas the newly constructed hospital is located on property acquired by the Government for use in connection with the field.

The offer to lease contained in the option dated November 16, 1942, was never accepted by the United States, and no notice, either oral or written, was ever given to the trustees of the Saunders Memorial Hospital or to any representative thereof that the Government desired to accept the offer contained in said option.

On December 22, 1942, a construction directive was issued by the Office of the Chief of Engineers authorizing the construction of a hospital at the air base as previously directed on September 1, 1942. The records of the War Department indicate that this tacit rejection by the Office of the Chief of Engineers of the proposed lease was based primarily on the relative cost as compared with the cost of construction of a new hospital at the base.

Informal advices obtained from the Office of the Surgeon General of the Army are that no representative of that office ever definitely committed the Government to a lease or to the acceptance of the option to lease.

It is understood that, on the strength of his belief that the property would be leased by the Government, Dr. Smyser dismissed his staff and ceased operating the hospital.

A review of the facts fails to reveal that Dr. Smyser or the trustees of the Saunders Memorial Hospital, at any stage of the negotiations, were misled by representatives of the War Department or given cause to believe that the option to lease the hospital would be accepted by the United States. Therefore, the reasons for the rejection of the proposal by the Office of the Chief of Engineers have no bearing on the merits of the bill. There is no legal obligation on the part of the United States to compensate Saunders Memorial Hospital in any amount. As no lease was ever consummated, the premise upon which the bill is based is incorrect in stating that the losses allegedly sustained are the result of the failure of the United States to carry out the terms of a lease for the duration of the war and 6 months thereafter. Should the United States have accepted the option and entered into a lease, there would have been no obligation on the part of the Government to continue the lease in effect for the duration of the war or the present national emergency plus 6 months thereafter in view of the terms of the offer which specifically provided that the lease term would commence as of the date of occupancy by the Government and expire on June 30, 1943, with the privilege in favor of the United States to successively renew the lease upon

the same terms annually for the duration of the present national emergency and 8 months thereafter. Therefore, if a lease had been consummated, it would have expired by its own provisions on June 30, 1943, unless renewed prior to that date. In addition, such a lease would have carried a provision under which it could have been terminated by the Government upon 30 days' notice in writing at any time during the original term of the lease.or any renewal thereof.

Your attention is invited to the fact that there apparently is an omission in line 4 of the bill which ordinarily would read “to pay, out of any money in the Treasury, not otherwise".

Your attention also is invited to the fact that leases are negotiated in the name of the United States of America, and that an option, not a lease, had been granted to the United States. Therefore, the reference in lines 9 and 10 of the bill to the alleged "failure of the United States Army Engineer Corps to carry out the terms of a lease” is technically incorrect.

It is noted that the bill does not contain the usual provision prohibiting the payment out of any amounts so appropriated of a commission or fee in excess of 10 percent of the amount appropriated.

For the foregoing reasons, the War Department does not favor the enactment of H. R. 1737.

The Bureau of the Budget advises that there is no objection to the submission of this report. Sincerely yours,

HENRY L. STIMSON,

Secretary of War. Nov. 16, 1942, to Feb. 6, 1943, 82 days with average loss of 25 patients,

at $15 per day, for X-ray, operating room, anesthetics, laboratory, board and room, special drugs, private nurses board..

$30, 750 Loss of professional fees, 82 days, at $50 per day. Less income from training school, 25 nurses, at $50.

1, 250 Monthly increase in operating expenses for personnel, replacing the

training school of 25 by 19, and being required to pay a new superintendent of nurses and the new night supervisor, each $25 a month more, and taking a minimum of 3 months operating at a loss: Superintendent of nurses.

$25 Night supervisor..

25 8 nursing aides, at $40.

320 8 graduate nurses..

680 20 information girls..

120 1 dispensary nurse.

85

1, 255

4, 100

Total....

37, 355

HOUSE OF REPRESENTATIVES,
COMMITTEE ON MILITARY AFFAIRS,

Washington, D. C., September 15, 1943.
Hon. A. J. MAY,
Military Affairs Committee,

House of Representatives, Washington, D. C. DEAR MR. CHAIRMAN: I submit herewith a report based upon inquiries and hearings relative to the above subject by your special committee, in accordance with the direction by the Chair.

This report has received our approval and, although we do not believe the premise and the evidence warrant submitting a report of the evidence and findings to the House of Representatives, it is our recommendation and request that it be called to the attention of the entire committee, and made a matter of record. Very respectfully,

Carl T. DURHAM, Chairman.
IVOR D. FENTON.
Thos. E. MARTIN.
CLIFFORD Davis.
ROBERT L. F. SIKE3.

H. Repts., 79-1, vol. 1-45

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