A HEARING BEFORE THE COMMITTEE ON NAVAL AFFAIRS OF HOUSE OF REPRESENTATIVES, The committee this day met at 1.30 o'clock p. m., Hon. Fred The CHAIRMAN. The next bill for consideration is H. R. 14922 which is to authorize an increase in the limit of cost of two fleet submarines. The bill in question reads as follows: A BILL To authorize an increase in the limit of cost of two fleet submarines Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the limitation of $5,300,000 each imposed in the naval appropriation act for the fiscal year ended June 30, 1926, on construction and machinery expenditures on account of two fleet submarines is hereby increased to $6,650,000 each. STATEMENT OF REAR ADMIRAL JOHN D. BEURET, CONSTRUCTION CORPS, UNITED STATES NAVY, CHIEF OF THE BUREAU OF CONSTRUCTION AND REPAIR The CHAIRMAN. This involves an increase on each submarine of $1,350,000. Admiral BEURET. That is true. The CHAIRMAN. What occasions this request for an increased authorization? Admiral BEURET. I do not know but what the best thing to do would be to read the letter of the Secretary. The CHAIRMAN. If you please. Admiral BEURET. Writing to the Speaker of the House of Representatives under date of December 6, 1928, the Secretary of the Navy said: I have the honor to transmit herewith a draft of a proposed bill to authorize an increase in the limit of cost of two fleet submarines. The purpose of the proposed legislation is to increase the limit of cost for construction and machinery of two fleet submarines authorized by the naval appropriation act for the fiscal year ending June 30, 1926, to $6,650,000 each. Fleet submarine V-5, building at the Portsmouth Navy Yard, and fleet submarine V-6, building at the Mare Island Navy Yard, both vessels using engines built at the New York Navy Yard, have a limit of cost for construction and machinery of $5,300,000 authorized by the naval appropriation act approved February 11, 1925. Under date of February 10, 1926, the Portsmouth and Mare Island Navy Yards were directed to submit estimates of navy yard costs and were authorized to proceed with the preparation of plans, schedules of materials, laying down of lines in the mold loft, and preparation of plate model, but were infor med that no purchase of material and no work of construction would be undertaken until such time as the estimates had been approved. On receipt of 2197-28-No. 29--1 (207) these estimates it appeared that the total cost of these vessels, including the navy yard estimates and other charges to be lodged against the limit of cost, would be somewhat in excess of the authorized limit. This department then arranged for representatives of the two yards and representatives of the Bureau of Construction and Repair and Engineering to meet at the Portsmouth Navy Yard for the purpose of studying the estimates in detail. We had this conference at the Portsmouth Navy Yard because that yard had records of costs for submarine construction. Mare Island had not built any submarines. However, all the costs were not at that navy yard. The engines were built at the New York Navy Yard and there were purchases of material to be made from outside. The CHAIRMAN. Is the principal increase in cost occasioned by work being done not only at the navy yards where the ships are being built but in some other Government navy yard. Admiral BEURET. The three navy yards and the increases are about proportionate. The CHAIRMAN. Have any increases occurred in the case of private contracts? Admiral BEURET. We have not built any submarines by private contract for some time-not since the submarines that were finished at the end of the war. The CHAIRMAN. Where you make contracts or where you accepted estimates from private concerns for delivering machinery or material in connection with these ships, in any instances of that character have the prices been increased-contracts or bids been increased? Admiral BEURET. There would be no prices at that time because we did not make the purchases at that time. However, we did compile estimates. We based the price of our material on previous purchases. The CHAIRMAN. Were those estimates all right? Admiral BEURET. I could not tell you. The CHAIRMAN. Have all these increases occurred because of the failure to make proper estimates at the navy yards themselves? Admiral BEURET. Yes; it is that, but it does not all apply to their own work. The CHAIRMAN. In which direction does it not apply to their own work? Tell me some place where the material you buy from private contractors can not be bought as cheaply as you estimated. Admiral BEURET. The greater part of it is probably in the cost of labor. However, all of this is special material and it is very difficult. to estimate the cost until the thing has been completely designed. So much of it is special material and estimates for cost in connection with types of vessels other than submarines do not help much. The work has to be much more carefully done than in other types of vessels. The CHAIRMAN. You and other officers have come here and told us repeatedly that it is practically impossible to have great repair jobs and modernization jobs done in private yards on account of the impracticability of making plans and specifications and foreseeing unknown conditions. That does not apply here? Admiral BEURET. No. The CHAIRMAN. Now you have a new ship and you appear to have been mistaken? Admiral BEURET. This is a question of the rise in costs that has been going on. We had to raise the limit of the costs on ships building in private yards. The CHAIRMAN. Since June, 1926, costs have not gone up materially Admiral BEURET (interposing). Our estimates were based upon records preceding that time. As a result of our experience in the construction of the V-4 we knew that the cost of the V-5 and the V-6 would be higher. Continuing the Secretary's letter: As a result of this study, revised estimates were submitted by the navy yard, from which it appeared that the estimated cost of the V-5 would be $5,298,000 and of the V-6, $5,283,000, both estimates containing an apparent margin of $137,000 to provide for contingencies.. At The present limit of cost for the V-5 and V-6 is the same as the limit of cost originally authorized for fleet submarine V-4 by the naval appropriation act approved May 28, 1924. In preparing the estimates for the V-5 and V-6, consideration was given to the probable cost of the V-4, which was building at the Portsmouth Navy Yard, using engines built at the New York Navy Yard. that time the estimated cost of the V-4 approximated the then limit of cost of $5,300,000 and careful consideration was given to the practicability of making such savings on the work as would permit building the V-5 and V-6 within the same limit, it being noted that these two vessels are of the same general type as the V-4, except that they have torpedo tubes aft instead of mine tubes, are about 50 tons heavier, and have two knots greater speed, and under the same conditions would cost somewhat more than the V-4. When we made the estimate of $5,300,000 for construction of the V-4 we based our estimates on our earlier returns and we thought those estimates were reasonably liberal. When the committee put in the limit of $5,300,000 for the V-5 and the V-6 we thought we would be just about able to get through on that. They are more expensive than the V-4, however. The CHAIRMAN. Why are they more expensive? Admiral BEURET. They are of the same general type as the V-4; except that they have torpedo tubes aft instead of mine tubes, and are about 50 tons heavier. Moreover, they are about 2 knots faster. They have more machinery, and machinery is more expensive than the hull. The machinery is nearly twice as expensive per ton as the hull. Continuing the Secretary's letter: The officers who studied the estimates were of the opinion, however, that the yards' expactation of more economical construction of the V-5 and V-6 was justified and the estimates were approved. Actually the V-4 cost a lot more than $5,300,000. It later became apparent that the V-4 could not be built within the original limit of cost and this limit was finally raised to $6,500,000. Similar action was indicated for the V-5 and V-6. The committees and the Bureau of the Budget were informally advised of this so that the matter might be considered in making estimates of probable expenditures, but the recommendation for a change in the limit of cost was deferred to as late as date as possible, so that more accurate information might be available as to the probable cost of the vessels. Practically complete cost returns are now in for the construction of the V-4 and it appears that the total cost of this vessel will closely approximate the present limit of cost of $6,500,000. Using the same unit costs and making allowance for the differences in design noted above, the total cost of the V-5 and V-6 would approximate $6,750,000 each. The V-4 was here recently having some work done. There is a little more work to do at the New York Navy Yard, but she is practically complete. However, there is relatively more machinery on the V-5 and the V-6 than there is on the V-4. Based on the revised estimates submitted by the Portsmouth Navy Yard for the V-5, the estimated cost of this vessel is $6,520,000. While it is expected that some economies will be realized in the building of the V-5 and V-6 as compared with the cost of the V-4, the Navy Department considers it uncertain if economies to the extent of those indicated by this estimate will be realized and recommends that the limit of cost for the V-5 and V-6 be increased to $6,650,000 each. In submitting these revised estimates the Portsmouth Navy Yard has the experience and the cost of building the V-4 before it. Mare Island has no such information. In other words, we are of the opinion that much more dependence can be placed upon this revised estimate of the Portsmouth Yard in view of its experience with building the V-4. Mare Island agreed to that and said it could come within any figure submitted by the Portsmouth Yard. They expect to do it. At the estimated rate of progress, the expenditures on the V-5, the more advanced of the two, will reach the present limit of cost in the fall of 1929 and the expenditures on the V-6 will reach the present limit of cost about the end of the calendar year 1929. We have placed the figure $6,650,000 each on these vessles so as to allow some margin if they do not meet the economies they expect to effect as compared with construction of the V-4. I may say that plans for both these submarines are being prepared by the Portsmouth Navy Yard. Mare Island is working from the Portsmouth plans so that we consider under normal conditions the V-6 will be about three months behind the V-5, which is the reason for the difference in the date of completion. As of November 1, the V-5 is about 44 per cent complete and the V-6 is about 35 per cent complete. The work on the V-5 up to this point, as nearly as we can tell, is somewhat cheaper than that on the V-4, and they should be able to do somewhat better than they did on the V-4. However, we doubt whether they do as well as their estimate shows. Continuing the Secretary's letter: The Navy Department therefore recommends that the limit of cost on these vessels be increased at the present time in order that the necessary authority may be available to proceed with such expenditures as will be required for the completion of the vessels. I might say, also, that I have looked up the cost of the submarines V-1, V-2, V-3. Considering the size of the vessels, and making allowance for the higher speed of the V-1, V-2, and V-3, as compared with these submarines, the costs are in reasonable agreement. The V-1, V-2, and V-3 are smaller and the total cost is therefore less. Continuing the Secretary's letter: The proposed legislation was referred to the Bureau of the Budget with the above information. Under date of December 6, 1928, the Director of the Bureau of the Budget advised the Navy Department that this proposed legislation is not in conflict with the financial program of the President. Mr. DARROW. You expressed yourself as expecting they would do the work cheaper at Mare Island than they would do it on the east coast. Admiral BEURET. They expect to; but I think also that Portsmouth expects to do better than Mare Island. We like to have two yards working against each other. It produces a wholesome effect. Mr. DARROW. I am wondering about that because the wage scale is higher, as I am informed, on the Pacific coast than it is on the east coast. Admiral BEURET. They think they can do better work at Mare Island than they can do on the east coast. We did not ask for revised estimates on costs from Mare Island because that yard has nothing upon which to base them. They have had experience in other types of vessels that are not comparable to these submarines. The Diesel engines are new and the structure itself in order to withstand the tremendous pressure has to be very carefully brought together in a way that is not required in ordinary ship construction. The joints must be so that you can not put a feeler in them. As I have said, we build the engines at the New York Navy Yard. They were designed by the Bureau of Engineering. Mr. VINSON. This is another time the Navy Department has had to come here and admit an error in estimates? Admiral BEURET. Yes. Mr. VINSON. How many times has your bureau had to make a trip like this? Admiral BEURET. Practically for everything built in private and navy yards since the war. Mr. WOLVERTON. What private yards? Admiral BEURET. The Omaha class. Mr. WOLVERTON. What yards, I mean? Admiral BEURET. Five of those cruisers were built at Cramps, two at Fore River, and three were built on the Pacific coast by Todd. Mr. WOLVERTON. In each case you had to ask for an increased appropriation? Admiral BEURET. Yes, sir. Mr. WOLVERTON. Were you not protected by a bond against increased cost? Admiral BEURET. These were cost-plus contracts. contracts. Mr. WOLVERTON. How about the basis of the contracts? Admiral BEURET. The Court of Claims recently allowed the Electric Boat Co. a fairly large sum of money on account of increased cost of labor, although the work they did was covered by fixed-price The court held that the action of the Government forced the contractors to pay increased wages and other expenses. During the war the Government, as you gentlemen all know, was in control. It could not be otherwise. It was not a normal operating condition. Then the very unsettled conditions following the war caused the prices of everything to go up and the use of our previous estimates was impracticable. Mr. VINSON. While the cost-plus contract was in operation, of course, you had to come here for additional money? Admiral BEURET. These, too, are in a way cost-plus contracts. Mr. VINSON. Has a navy yard in recent years built any ship or repaired any ship within the amount you have come to Congress and asked for in the first instance? Admiral BEURET. We do not ask for specific authorizations for repairs except in cases like modernizing. Mr. VINSON. Have you done any such work within the estimate? Admiral BEURET. Yes. The six coal-burning battleships, the Florida, Utah, Arkansas, Wyoming, New York, and Texas, are the ships I have in mind. |