names to somebody. I want to see just what kind of a process is followed. General ROBINS. We submit them to the O. P. M. Mr. WIGGLESWORTH. To whom? General ROBINS (continuing). For approval, and to the Spalding board, so called, for concurrence or suggestions. Mr. TABER. Where do they go? General ROBINS. And in the final analysis-- Mr. TABER (interposing). Does it go to anybody else in the meantime? General ROBINS. No. Then it is submitted to the Under Secretary of War, Judge Patterson. Mr. WIGGLESWORTH. He finally passes on it. General ROBINS. Yes. Mr. TABER. It is left up to Judge Patterson? Mr. WIGGLESWORTH. Is the Spalding board the same as the Blossom board? General ROBINS. Yes, sir; the Blossom board was created in the office of the Quartermaster General to receive applications from contractors, investigate their qualifications, and make recommendation as as to awards. Mr. JOHNSON of West Virginia. Who are these individuals? General ROBINS. There are four people now on that board in addition to General Spalding, Mr. Blossom, Major Harvey, Mr. Dresser, and Mr. Hammond. Mr. JOHNSON of West Virginia (interposing). Is Blossom mixed up in those contracts? General ROBINS. No. Mr. JOHNSON of Indiana. What firm was Blossom connected with? General ROBINS. Sanderson & Porter. Mr. JOHNSON of Indiana. And they have quite a number of contracts? General ROBINS. They have no contracts with the Engineering Department. Mr. STARNES. They have with the quartermaster? General ROBINS. Sanderson & Porter; yes. Mr. STARNES. The organization, I mean. Mr. O'NEAL. Will you give us the names of the rest of the contractors? General ROBINS. At Bermuda; Shaw, Naess & Murphy; Metcalf & Eddy; Ford, Backon & Davis. For Jamaica and Mayaguana, that is an island of the Bahamas that may be selected-Holibard & Root; Moran, Proctor, Freeman & Mueser. Mr. TABER. Have you the rates that are paid? General ROBINS. The fees for all the contracts are fixed on the same basis. Mr. TABER. Are you going to give the fees for each of these points for the record; we would like to have them? General ROBINS. I will be glad to do it. Mr. TABER. Plus the names and addresses. General ROBINS. I will be glad to put all of that in the record. General ROBINS. Yes. Mr. LUDLOW. As well as their addresses? Mr. LUDLOW. These are negotiated contracts, are they? Mr. WIGGLESWORTH. They are not let through competitive bids? Mr. JOHNSON of West Virginia. How do they go about selecting these fellows? General ROBINS. They are selected from a large list of engineers and architects. Mr. LUDLOW. From a qualified list? General ROBINS. Yes. Mr. O'NEAL. Will you please complete the list, General? General ROBINS. For Trinidad, Antigua, St. Lucia, and British Guiana: The firms of Voorhees, Walker, Foley, & Smith; and Parsons, Klapp, Brinckerhoff & Douglas. Mr. WIGGLESWORTH. They have got some other contract work, have they not? General ROBINS. These are the four engineering contracts. Mr. WOODRUM. Just insert that in the record, if you like. General ROBINS. You want the construction contracts for Trinidad. tion contracts. General ROBINS. I will put that in the record. (The information requested follows:) Negotiated cost-plus-a-fixed-fee contracts, engineering, and architectural services for Location and contractors outlying island bases Newfoundland: Shreve, Lamb & Harmon (11 Bermuda: Shaw, Naess & Murphy (80 East Jamaica and Mayaguana Islands, British Trinidad, Antigua, and St. Lucia Islands, Negotiated cost-plus-a-fixed-fee contracts construction contracts for outlying island 1. Antigua: S. J. Groves and Sons, Inc. (Muni- 509 Wesley Temple $2,880, 000 cipal Bldg., Ridgefield, N. J.). 2. Bermuda: Arthur A. Johnson Corporation and Necaro Co., Inc. (28-29 Hunter Ave., Long Island City, N. Y.); VermilyaBrown Co., Inc. (100 East 42d St., New York, N. Y.). 3. British Guiana: The Elmhurst Contracting 4. Newfoundland: Al Johnson Construction 5. St. Lucia: The Minder Construction Cor- 6. Trinidad: Geo. F. Driscoll Co., (548 Union Firm Bldg., Minneapolis, 100 East 42d St., New 19, 000, 000 53-04 97th Pl., Corona, 3,000,000 15 Moore St., New 23, 400, 000 228 North LaSalle St., 3,000,000 900, 000 46,000 5, 190, 000 180,000 548 Union St., Brook- 51, 000, 000 St., Long Island Schedule of fees for construction, estimated contract costs by increments $900,000 $2,000,000 $2,456,000 $3,000,000 $3,360,000 $4,000,000 $5,000,000 $5,190,000 2. 3. 4. 6. Firm $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 Mr. TABER. These contracts are on a cost-plus basis, are they? General ROBINS. Yes. Mr. TABER. And that means that no matter how much it costs he gets a certain percentage for doing the work? General ROBINS. No; the fee is fixed. Mr. TABER. The fee is set? General ROBINS. Yes. Mr. TABER. For the contractor. General ROBINS. Yes. Mr. TABER. And for the engineering. General ROBINS. It is the same. The only time the fee can be raised is by the addition of work, but not by an increase in the cost of the work. Mr. TABER. Increasing the cost of the job does not produce any more money for the contractor? General ROBINS. No. Mr. LUDLOW. Who started the plan of fixing the fee; how was that begun? General ROBINS. At the beginning of the emergency the Army and the Navy Munitions Board appointed an advisory committee of prominent engineers and they established what you might call a minimum rate of fees both for engineering service and for construction service. The law limits the fee to 6 percent of the cost of the work; it cannot exceed 6 percent. And, the percentage for the fee is graduated downward as the volume of work increases. The fees that the War Department are using vary from about 41⁄2 percent on $2,000,000 worth of construction down to 21⁄2 percent on anything over $30,000,000; that is for construction. Now for engineering it goes down very rapidly. Mr. O'NEAL. You have a man by the name of Voorhees in your department? General ROBINS. Mr. Voorhees is in the Office of Production Management. Mr. O'NEAL. Is that the same Voorhees who was a member of the engineering firm? General ROBINS. Yes; but he has nothing to do with selecting contractors. Mr. JOHNSON of West Virginia. In what department is he? General ROBINS. In the Office of Production Management. Mr. COLLINS. General, has the Engineers' Office worded these contracts so there will be no inducement for these men to waste money through lack of management or otherwise? General ROBINS. Yes; the contracts are worded so that every expenditure that they make has to be approved by the contracting officer before they can be made. Mr. COLLINS. That does not answer my question. My question is whether or not you have so worded these contracts that money will not be squandered and wasted because of an inducement on the part of these people with whom you have contracted to increased their fee because of these large contracts? General ROBINS. The fees are fixed. The contracts are so worded that they fix the fee. The fee is not a certain percentage of the actual cost to the contractor; it is determined before the contract is signed. Mr. WOODRUM. There is a big difference between the cost-plus contract and the cost-plus-a-fixed-fee contract, is there not? General ROBINS. Yes; a big difference. Mr. WOODRUM. The cost plus contracts are the kind the Government had before. Mr. COLLINS. In other words, what you are saying is that there can be no building up of the cost of construction so as to make the return to the contractor larger. General ROBINS. No; none whatsoever. They can make no money by increasing the cost of construction. Mr. STARNES. It works the other way, does it not? General ROBINS. Yes; the sooner they get the work done the quicker they are available for another job. Mr. CASE. Mr. Chairman, in one of the items we considered the other day, we had a table of costs under the cost-plus-a-fixed-fee contract, showing that they exceeded the original estimates by 85 percent; whereas those that were done by direct contract exceeded the original estimate by only 50 percent, so in spite of the lack of inducement on the part of the contractor to make it cost any more they are actually running considerably higher. I believe the engineers told us the other day on some of the air construction in this country they were holding it down to about 50 percent above the original estimate. General ROBINS. We save on lump-sum contracts; they are much better than any kind of a cost-plus-a-fixed fee contract. But the increase in cost on fixed-fee contracts has been due to several things. It is due to the increase in cost of labor and materials; it is also due to the fact that the original estimates were too low. Mr. CASE. I recognize that is true, but I remember we took this up on several items that were only about 48 percent, whereas the cost-plus-a-fixed fee ran above 85 percent. In other words where you have a lump sum contract. And, on the cost-plus-a-fixed fee it averaged about 85 percent above the original estimate as compared with 50 percent on the lump-sum contract. General ROBINS. That may be. Mr. CASE. Is there anything in the way you let these contracts to make it to the interest of the contractor to hold the costs down? General ROBINS. Congress in authorizing use of the cost-plus-a-fixed fee contracts forbade the use of the bonus or the penalty system. The only incentive for the contractor to hold the cost down is to safeguard his reputation plus the risk of making expenditures that will be disallowed by the contracting officer. Mr. TABER. The largest part of the profit is on the equipment that is rented to the Government by the day in connection with the job, is it not? General ROBINS. There is some. It depends on the situation. If the equipment is new equipment the Government buys it outright from the start. If it is rented, as soon as the rental paid gets up to the value, the book value of the equipment, we take it over. FUEL FOR THE ARMY Mr. JOHNSON of West Virginia. General, there are a great many rumors afloat, particularly with reference to the Army. I do not know whether they are correct or not. I do know one that was correct. That was the question of handling fuel for the Army. They started there to get themselves in deep water. This committee appropriates money. It also investigates the method and manner in which you are spending it. I just want to make that statement, and that comes from me and me alone. I do not speak for the other members of this committee. So I am warning you now that in every contract you make you had better be sure you are right. You were wrong on your coal end of itterribly wrong and you came very near getting into trouble. Mr. WOODRUM. They straightened it out all right, though, Mr. Johnson. Mr. JOHNSON of West Virginia. Yes; they straightened it out, because they were told where to head in. |