Chapter IV
Wartime Contract Construction Problems

During five years of preparedness and actual war, the Navy was confronted with the perplexing task of speedily expanding its shore establishment in the face of wide competition for the essentials of construction: materials, equipment, labor, and technical assistance. The problem was further complicated by the fact that shore construction frequently had to be performed where one or more of the essential elements was unavailable. At each construction site the essentials had to be assembled, either from local or from outside sources, and woven into a completed facility, ready for the operating forces to take over. More important, they had to be made into a usable facility, with the utmost speed.

To ease the problems which arose in the congested economy, numerous official acts, orders, and agreements were promulgated.

One of the first moves designed to speed construction was made on April 25, 1939, when Congress authorized the use of the cost-plus-a-fixed-fee (CPFF) form of contract for work at outlying bases. Much time was saved in preparation for work under this form, because plans and specifications did not have to be completed before work began. The same act authorized the Navy to acquire the assistance of architects and engineers, so that plans and specifications could be made more quickly. On June 11, 1940, the authority to make CPFF contracts was extended to include work inside the United States.

The First War Powers Act, passed December 18, 1941, allowed the President to prescribe regulations modifying existing contract procedures where modifications would speed the performance of contract work. By executive order, on December 27, the President set forth the regulations called for in the First War Powers Act. One feature of the order which sped contract work was the permission to use letters of intent. The letter of intent was in informal contract which was issued pending the signing of the much longer and more detailed formal contract. On many jobs, work was performed for three or four months on the basis of a letter of intent before the formal contract was issued. The executive order also permitted many forms of contractual agreement, such as change orders, purchase orders, open purchase orders, and informal contracts. Contracts could be let by direct negotiation with contractors, rather than by advertising for bids, and advance payments could be made on contracts when such advance payments were necessary to enable a contractor to perform essential work.

The first move by the government to regulate the use of materials and equipment took place January 7, 1941, when, by executive order, the President set up the Office of Production Management, which was to be metamorphosed in several ways during the ensuing months and finally emerge as the War Production Board in early 1942. In mid-1941, rough priorities for the use of materials were set up by executive order, and on March 22, 1942, with the passage of the Second War Powers Act, priority and allocation power became law. It was the purpose of these controls to assure a supply of materials and equipment to construction and other activities in the proper order of importance.

Three important moves were made to assure an uninterrupted supply of labor to the construction jobs. The first was the Building Trades Stabilization Agreement, made in the spring of 1941 between the Office of Production Management and the Building Trades Council of the American Federation of Labor. This agreement pegged wages at existing levels, set forth conditions of overtime payment, and included a "no-strike" pledge by the unions. Machinery was set up to arbitrate disputes which might arise in the administration of the agreement. The first agreement was followed in May 1942 by a wage-stabilization agreement, under which a board for pre-determining wage rates on new work and making wage adjustments was established. Wage stabilization became law in the

Machine Shop at Mare Island Navy Yard

fall of 1942 with the passage by Congress, on October 2, of the wartime Wage Stabilization Act.

An important part of war construction was the acquisition of sites for much of that construction. Early in the period of this history, real estate acquisition was the joint responsibility of the Judge Advocate General's office and the Bureau of Yards and Docks. The Second War Powers Act authorized the Navy to occupy property as soon as condemnation proceedings had been started. Occupancy usually meant construction, so the Bureau of Yards and Docks frequently became interested in property as soon as condemnation was started. On July 20, 1942, the Judge Advocate General's part of real estate cognizance was transferred to the Bureau of Yards and Docks.

Construction and Service Contracts

In contract construction work, the form of the contract had an important bearing upon the Bureau's success in prosecuting its war assignment.

Seven times as many construction contracts were awarded to civilian contractors by the Navy in World War II as in World War I. The earlier war took place in a much shorter period, to be sure, but the total sum authorized for contract expenditure in the war construction program from July 1, 1940 to August 31, 1945 was about fifty times that of the earlier program. In World War I, construction was authorized under 1,016 awarded contracts. In World War II awarded contracts numbered 7,427. Almost three-fourths of the money value of these contracts was included in the special wartime form of contract, the cost-plus-a-fixed-fee (CPFF), which was used to speed important work, in a manner which would have been impossible under peacetime lump-sum contract procedures.

The contracts awarded by the Bureau in connection with the World ar II construction program were classified in six categories, although in the strictest sense there were two forms, the lump sum and the CPFF. The six were as follows:

Type contract	Number of contracts	Amount Authorized	Amount spent 31 August 45
Lump sum	5594	$1,217,715,355	$1,038,650,778
CPFF	458	4,248,527,055	4,203,545,012
Service	1030	98,966,071	91,288,237
True Cost	23	3,102,191	2,037,888
Civil Works	294	466,309,861	460,801,567
Advance Base and Confidential	28	2,749,358,304	2,014,184,978
Total	7427	8,783,989,837	7,811,508,460

Normal Contract Procedure

In the years between the wars, when funds were limited and speed was not a vital factor in the construction program, the usual form of Navy contract

was the lump sum. In the lump-sum contract the Navy bought a completed facility, which the contractor had agreed to build in a specified period of time and at a stated price.

Before such contracts could be awarded, it was necessary to prepare complete and detailed plans and specifications, advertise for bids, and allow prospective bidders a reasonable time to study the bidding data, the site on which the work was to be done, and the current and probable labor and material markets. After bids were opened, time was required for their study, the award of the contract, and the preparation of the bonds and other contract papers. Only after the contract was signed by both parties did the contractor have the authority to commence operations.

In the lump-sum form of contract, the contractor assumed complete financial and managerial responsibility; the purchaser performed only the necessary inspection. Whether the contractor gained or lost by the transaction was his affair; naturally, his bid included an allowance for profit and a suitable margin to cover the risks and unknowables. This contingent allowance depended on the character and location of the work and the temperament of the bidder. Experienced and prudent contractors made ample allowances in their bids, and if any, or all, of the contingencies did not materialize, the government paid for something it did not get and the contractor's profits were unduly increased. On the other hand, some contractors gambled on this point, thereby becoming low bidders and receiving contracts. While this reduced contract prices, it sometimes resulted in such serious financial losses to the contractors that they could not complete their work, and the ensuing complications frequently led to serious delays. However, in normal times, the element of competition in awarding contracts was a basic requirement of law which was necessary to avoid complaints of favoritism. The lump-sum procedure could be waived only under unusual circumstances.

Unit-Price Contracts

A variation in the lump-sum for of contract sometimes was used in cases where the work consisted of measurable quantities of one or more classes, such as dredging or other excavation (cubic yards), paving (square yards), piping (lineal feet), etc. This was called a unit-price contract, bids being obtained on each of the specified units. The low bidder was determined by a comparison of the summation of the amount obtained by multiplying the bid prices by the estimated quantities as stated in the specifications.

The contractor was then paid at the contract price for the actual quantities which he performed. This usually resulted in a final cost more or less than the anticipated amounts, the variation depending on the accuracy of the preliminary estimates. The unit-price contract somewhat reduced the element of risk or contingency, but in all other points it had the advantages and disadvantages of the usual lump-sum form of contract.

Cost-Plus Contracts

In the period of emergency involving national defense, there were many projects of such importance that their accomplishment with the utmost speed and certainty was paramount. Time did not permit preparation of the comprehensive information necessary for obtaining bids. Furthermore, in a large proportion of such projects the requirements were defined only in a general way at their inception, and they had to be worked out in detail as the work proceeded. Some method, therefore, had to be found that would encourage experienced and responsible contractors to undertake the emergency work. The type of contract had to provide a minimum of financial risk and a guarantee of reasonable compensation.

Two principle forms of contract have been used by the Navy to accomplish this purpose -- the cost-plus-a-percentage and the cost-plus-a-fixed-fee. These forms, with some variations, were much used in private work. Both, and particularly the cost-plus-percentage, were used by the Navy in World War I. In both these forms, generally called cost-plus contracts, the contractor was reimbursed for the actual cost of the work, with certain limitations and exceptions, and, in addition, he was paid for his services in superintending and managing. The Navy assumed the risks, uncertainties, and contingencies, inherent in any contract, which were multiplied under wartime conditions.

The principal difference in the two forms was in the method of determining the fee, or profit, which the contractor received for his services.

In the cost-plus-percentage contract, the fee was proportionate to the cost, so that it was to the advantage of the contractor to have the cost high, because for every dollar spent he received a proportionately

larger fee. In a cost-plus-a-fixed-fee contract, the fee was pre-determined, based on the estimated cost of the work, the nature of the work, and the time required for its performance.

In both these forms of speedy-construction contracts, the purchaser assumed the risk on the uncertainties and unknowables, paying the construction costs. The contractor furnished experience and management skill, and bought labor, materials, and equipment. He was reimbursed for his costs of constructing the facility. The purchaser, through supervision and inspection, saw to it that the work was properly done and that costs were kept as low as possible.

The use of the cost-plus form of contract presupposed the selection of a reliable and experienced contractor. There was no competition on the basis of cost, other than the selection of contractors whose records and reputations gave assurance that the work would be performed efficiently. A CPFF contractor had, therefore, no profit advantage in increasing the cost of the work unnecessarily. On the contrary, there was an inventive to conduct operations in such a manner that he would be given favorable consideration in the placing of additional contracts.

After World War I, there was no authority for the use of the cost-plus method of contracting until the beginning of the emergency construction program early in 1939. This program at its beginning involved the speedy development of outlying bases, where material and labor markets were limited or non-existent, transportation problems difficult, working conditions hazardous, engineering data meager, and the facilities required subject to change as circumstances should dictate. Under such conditions, lump-sum or unit-price contracts were impracticable.

Experience with cost-plus-percentage contracts in World War I had given rise to much criticism, and this, together with the patent objections to that method, made its use inadvisable. (It was later prohibited by law.) The Chief of the Bureau of Yards and Docks, therefore, decided that the only feasible method of securing the desired results was the cost-plus-a-fixed-fee contract. Through his efforts chiefly, the first legislation which authorized the construction of certain public works of immediate strategic importance as being necessary of accomplishment at the earliest practicable date contained a provision authorizing CPFF contracts in locations beyond the continental limits of the United States, at fees not in excess of ten per cent of the estimated cost less the fee. This legislation¹ was approved on April 25, 1939. It authorized the award of contracts, without advertising or proposals, after negotiations with three or more contractors regularly engaged in work of comparable magnitude and class. Subsequent naval appropriations legislation removed the geographical limits on CPFF contracts and reduced the maximum fee, in percentage of estimated cost less the fee, first to six per cent and later to four per cent.

The first CPFF contract. -- It having been determined, in accordance with the recommendations of the Hepburn Board, that air bases in the Pacific, including those at Wake, Midway, Johnston, Palmyra, and the Hawaiian Islands, were of the first order of importance, an advisory board was appointed by the Chief of the Bureau of Yards and Docks to consider the qualifications of various contractors and to make recommendations as to who should do the construction. The board made its preliminary report May 4, 1939; on June 22, five contractors were recommended as suitable; on August 5, contract Navy-3550, the first of the World War II CPFF contracts, was awarded in the amount of $15,500,000, three firms being joined as the contractor. Less than a month later, the war in Europe began. Between three and four months elapsed from the time the work was authorized until the award of the CPFF contract. Had the lump-sum form of contract been mandatory, the necessary surveys, preparation of plans and specifications, advertising, opening of bids, and award would have required at least a year.

From a military standpoint, this saving in time was of the utmost importance. As to cost, under the usual competitive-bid procedure, competent bidders would have included in their proposals a large contingent item to protect themselves against the hazards of the sea for personnel, plant, and materials, for housing and caring for employees on isolated islands, and for the unforeseeable contingencies.

Two other, similar, contracts were awarded in 1939 -- one, for work at Kodiak and Sitka, Alaska, on August 29; the other, at San Juan, Puerto Rico, on October 30.

A standard form was established for these contracts, which form, with minor modifications, was

Supply Department Warehouse, Pearl Harbor Navy Yard

used by the Bureau for all its World War II CPFF contracts. In this form, the extent of the work was shown by items, called "projects," which indicated by number the character, and the scope of the various types of work included in the contract. The estimated cost of each project was given, primarily as an indication of its magnitude, for there was neither sufficient time nor information to make accurate estimates. The fee was determined by the Bureau according to the character and location of the work, its total estimated cost, and the statutory limitation of the ratio of the fee to that estimate.

In all the aforementioned contracts, and most of the subsequent ones, numerous changes were made after the contracts were signed. Some projects were eliminated, other reduced or increased in scope, and many new projects were added. For each change an appropriate fee was determined, to be added to or deducted from the original fee according to whether the scope of the work was increased or decreased by the change.

The original estimated cost of contract Navy-3550, including the fee, was about $15,500,000. This was increased to more than $20,500,000. On July 1, 1940, under greatly increased appropriations for work in the Pacific islands, a new contract for work in that area was made with five contracting organizations, including the three who had been joined in contract Navy-3550, and the work under the older contract was gradually terminated. The original estimated cost of the new contract, including the fee, was $30,870,000. Large additions were made to this contract until late in 1942 it had so increased in cost and geographical extent that the

Naval Air Station, Sitka, Alaska
Photograph was taken in February 1940 and shows contract administration building
and temporary warehouses.

addition of three more contractors, making eight in all, was considered necessary. When the contract was finally terminated, on December 31, 1943, its estimated cost had increased to more than $340,000,000. Of the other two contracts awarded in 1939, that covering the work in Alaska was terminated on July 1, 1943, at which time added work had increased the original estimated cost of $12,739,000 to more than $117,000,000. The Puerto Rico contract, which was terminated September 1, 1943, had been increased from $8,475,000 to more than $103,000,000.

No further CPFF contracts were awarded until July 1, 1940, when additional large appropriations became available. From July 1, 1940 to December 31, 1940, a total of 105 CPFF contracts were awarded whose original estimated cost of $283,143,460 was ultimately increased by changes and additional work to more than $1,600,000,000. From January 1, 1941, to December 7, 1941, another 60 CPFF contracts were awarded, whose original total cost of $202,000,000 ultimately was increased to approximately $498,000,000.

These large expansions of CPFF contracts were justified by the fact that it was more economical and efficient to add work in the same locality to existing contracts than to bring in other contractors who would have to establish and maintain new organizations. This would have increased the inspection, accounting, etc., by the Navy and, in many cases, would have involved conflicts in facilities and working spaces, as well as complications in security measures.

CPFF flexibility. -- In addition to the gain in time at the start of work, it was found that the CPFF contracts had further time-saving attributes. In every large contract, it was invariably found that certain changes or supplements to the work as originally planned were desirable in the rapidly changing war program. If a lump-sum price had been agreed to for the project, there would always have been the possibility of dispute as to the price

adjustment required by departures from the original plans. Under the CPFF form, the contractor, knowing that the cost of such departures would be reimbursed by the government, had no hesitancy in going forward at once with them. For the same reason, it was much simpler to speed up work through overtime, additional employees, etc., under the fixed-fee form than it would have been to obtain an acceleration of the completion date under a lump-sum contract.

Another benefit which the Navy negotiators felt accrued by the use of the CPFF contract was that, by constant and direct supervision, it was possible for the Navy and the contractor to decide upon corrective measures whenever workmanship was subject to dispute. The contractor had no hesitation in complying with the instructions of the Navy's officers in charge of construction with regard to the quality of materials and workmanship to be incorporated in the job. This quality of the CPFF form was partially valuable in a restricted material and labor market such as that which prevailed during the war. If the contract had been lump-sum, there might have been considerably dispute if the contractor believed that he was being directed to perform work in a more expensive manner than was called for under the plans and specifications upon which he had estimated his contract price. And if the contractor (lump-sum contract) had been operating on a narrow margin or at a loss, experience showed a tendency on the part of the contractor to cut corners.

Admiral Moreell's appraisal of CPFF. -- On June 30, 1941, the Chief of the Bureau appeared before the Senate Committee on Naval Affairs, for the purpose of discussing the CPFF contract and it use by the Navy. Admiral Moreell pointed out that the three objectives of the CPFF contracts -- (1) to do the work expeditiously; (2) to do the work well; (3) to do the work as economically as the first two considerations permitted -- were being accomplished.

Work was done expeditiously because the contractor started as soon as the contract was awarded, on the basis of such general outline of the work as might be available. He knew that the government would assume the risk of all contingencies, would pay him his reimbursement costs, and that he would, in addition, receive his fee, even though the actual amount of the fee might not be, and, indeed frequently was not, settled at the time he started work. Necessary plans and specifications were furnished as the work progressed and in some instances were only a short jump ahead of the work itself.

In determining reimbursable costs, the Chief pointed out that, except in isolated instances where they were clearly a direct cost to the specific contract, no central-office expense of the contractor was reimbursable under the Bureau's form of CPFF contract. Likewise, interest on operating funds, salaries of executive personnel, bonus payments to administrative and supervisory employees, certain traveling expenses, etc., were non-reimbursable. There was also a ceiling of $9,000 placed upon salary of any employee whose pay was to be reimbursed by the government, regardless of how much the employee was paid by the contractor, who paid the difference out of his fixed fee.

As to the fixed-fee itself, it was shown that during the period from August 5, 1939, to September 30, 1943, during which time the Bureau entered into 416 CPFF contracts, the fees awarded averaged 2.84 percent of the estimated cost of the projects, exclusive of fee. It was because the government assumed the construction risks that the contractor was willing to accept a much smaller profit than he would have under a lump-sum contract.

Admiral Moreell further pointed out that CPFF projects seldom involved the reproduction of standard units under the same or similar conditions. In many instances, the work was done at an outlying or exposed base, where living and weather conditions were uncertain, distances from material and labor markets were great, and unusual working hazards and construction difficulties were the rule rather than the exception. Even in those instances of relatively similar projects within continental United States, the variations in location, in labor and material markets, and in construction and transportation difficulties encountered, were such that one job seldom afforded a reliable cost-comparison basis for utilization on other projects.

Contractors, as always, were willing, for a lump-sum price, to undertake almost any project on the basis of the information obtainable, provided they were allowed to include a contingent item sufficient to cover all possible developments, the Admiral said. In most of the projects which the Bureau accomplished under the emergency program, however, time was of the very essence, and, accordingly,

General View of Bainbridge (Md.) Naval Training Center

the information which could be made available to the contractor within permissible time limits would have required the inclusion of an inordinately large contingency item.

If Congress had not granted authority to use the CPFF form for the construction which began in the Pacific in the fall of 1939, Admiral Moreell declared that he conservatively estimated that the commencement of that work would have been delayed many moths, and that even then its speed would have been further decreased by lack of flexibility in operation. What such a delay would have meant in the defense of Midway Island would not be difficult to imagine. With respect to Midway, the original fixed-fee contract for the improvements there contemplated work of an estimated cost of only $3,720,000. The contract, negotiated in August 1939, contemplated completion in August 1942. Through supplemental agreements to the scope of the work, however, there had been accomplished by June 3, 1942 (the date of the Japanese attack) approximately $20,000,000 worth of work, including complete land-plane and seaplane facilities, the availability of which was of material assistance in the defeat of the Japanese fleet.

Moreover, the Admiral declared that the CPFF form of contract furnished a definite incentive to accomplish the work as expeditiously as possible. The fee was fixed, so the contractor obviously saved more money if he completed the work in six months instead of eight. In addition, as there was

no reimbursement of central-office expense, such expense was a dead weight as long as the job was open. Because of the salary ceiling, also, the contractor would wish to complete the job as quickly as possible.

According to Admiral Moreell, certain definite conclusions, based on four years' administration of CPFF contracts, were reached by the Bureau:

(1) In practice this form of contract proved a most useful emergency tool; it materially assisted in the accomplishment of the emergency construction program with expedition, certainty, and relative economy; no other form of contract could have been used with comparable success.

(2) Such contract form should be used when, because of the urgency of the project or some other reason, plans, specifications, and other information cannot be supplied to interested bidders; otherwise, the contingency allowance required by an competent contractor will be prohibitive. Similarly, when the construction project is a sizable one in which undue hazard is present (whether because of the nature of the undertaking or the geographical location or other factor), then, even though plans and specifications and general information are available and competent contractors are available, it will ordinarily be to the government's ultimate interest to use the fixed-fee form.

Contractor qualifications. -- When the Bureau of Yards and Docks began negotiating contracts with selected groups of contractors instead of advertising for bid, it became necessary to develop extensive files on contractor qualifications so that the Bureau could know which contractors would be likely to be able to perform each new job.

At the beginning of the National Defense period, the Bureau had qualification information on about 250 contractors and architect-engineers.

In 1940, the Bureau circularized the members of the American Society of Civil Engineers, the American Institute of Architects, and the Associated General Contractors, asking them to fill in a questionnaire which would give the Bureau information on experience, financial capacity, personnel, and other qualification data. To be eligible for Bureau work, a contractor or architect-engineer had to file this information with the Bureau.

By 1945, information on 5,500 contractors and 3,500 architect-engineers had bee assembled.

The files were used for checking qualifications prior to the award of a contract, for obtaining lists of contractors to whom plans and specifications for new jobs might be sent, and as a basis for approving bidder lists submitted by officers in charge of construction on contracts costing more than $200,000.

Negotiated Lump-Sum Contracts

By mid-1943, conditions had improved to such an extent that plans and specifications could be prepared on most projects. Much of the necessary purchasing and subcontracting had been provided for, and information had been fully developed on conditions which would otherwise require contingency allowances. As a result, it was possible to compute closely on a proper lump-sum figure for the completion of work by a specified date, with the allowance for contingencies practically negligible. Consequently, with the exception of a few contracts in which such a procedure was not practicable, the CPFF contracts were terminated, and the completion of the work was accomplished with lump-sum contracts.

Between July 1, 1940, and March 31, 1943, only 41 lump-sum contracts had been awarded in amounts of one million dollars or more; between March 3, 1943, and June 30, 1945, the number of lump-sum contracts in that category amounted to 201. These lump-sum contracts were somewhat different from those of the same name awarded in peacetime, in that the bids were not advertised, for obvious security reasons, but were submitted to contractors who had been approved by the Bureau. This was in accordance with a ruling by the War Production Board, which, under date of October 10, 1942, in recognition of the abnormal conditions prevailing during the emergency, in effect directed that all contracts for government war work be made on a negotiated basis. While this limitation in no way precluded the solicitation of informal competitive bids, it did bar the letting of contracts on the traditional advertising competitive bid basis.

The shift in emphasis to the lump-sum for of contract in 1943 did not reflect any dissatisfaction with CPFF but was made in recognition of changed conditions which permitted more leisurely procedures. Indeed, in his published report on the use of the CPFF contracts, made in November 1943, Admiral Moreell declared that where speed and certainty of accomplishment were the determining considerations, he was convinced that the CPFF was the most satisfactory contractual medium.

Loans to Contractors

Because of the tremendous increase in government contracts, and the relatively small number of contractors who were financially able to undertake the work, it was necessary for the Navy Department to devise some method to finance smaller

Sub-Assembly Shop and Steel Storage Shed, New York Navy Yard

companies which had the "know-how" but not the resources.

The Navy Department, therefore, began to guarantee various percentages of loans by commercial bankers to contractors. The percentages ranged from 33 to 100.

Four types of loans were used to speed up the awards of contracts. These were V-loans, T-loans, VT-loans, and a so-called interest-free loan.

V-loans were primarily for production. The contractor was able to obtain money needed to finance government work, from a bank, which would have been inclined to deny the loan had it not been for the Navy's guarantee that the money would be repaid.

T-loans were designed to put the contractor back into civilian employment without having to wait until the government paid for inventoried material on a government contract. The loans were made at the termination of a contract only. When a contractor terminated a contract, invariably his earnings were largely tied up in inventory. This inventory price was presented to the government for review before payment. Frequently, this process took months. Most T-loans were guaranteed by the government to the extent of 90 percent.

VT-loans were a combination of the two foregoing types of loans and were used when a contractor had more than one contract with the government. Only a portion of the loan was made at the beginning of work, and it was necessary for the contractor to complete at least one of the contracts before he could obtain the balance of the loan. This money could then be used on the other contract, and all work was thus speeded.

Although these loans were not guaranteed directly by the Bureau of Yards and Docks, any money used by the Navy to cover defaults was chargeable to Bureau funds. Whenever a contractor applied for a loan guarantee, the Navy Department referred the application to the Bureau, for information on the contractor's equipment, "know-how," and organization -- his potential ability to meet his financial obligations.

During the war, more than $25,000,000 was authorized for guarantee on loans to Bureau of Yards and Docks contractors. The Bureau lost no money on the loans.

Service Contracts

The preceding discussion has been concerned primarily with construction contracts. However,

although a lump-sum contract could not be awarded with complete plans and specifications, even a CPFF contract could not proceed far without plans. The Bureau's Planning and Design Department and the several public works organizations in the field were capable of meeting usual demands but could not possibly furnish more than a very small part of the design services required for the emergency program. Prior to 1939 there had been no blanket authority for securing the services of architects and engineers on any basis other than their employment in a civil service status. There were specific instances, however, where they were secured by contract for a particular job, by Congressional authorization in the appropriation act.

In the same law which, in 1939, authorized CPFF construction contracts, there was a provision which authorized the Secretary of the Navy to employ non-Navy architects and engineers, by contract or otherwise, to make the designs, plans, and specifications required for the accomplishment of naval public works. Under this authority, 739 contracts were made with architects and engineers, for design services in connection with CPFF and other forms of construction contracts. Some of these design contracts, especially the earlier ones, were CPFF, in which the architect or engineer was reimbursed for the salaries and expenses of his assistants who were engaged on the work, plus a fixed amount as fee or profit. Wherever possible in such contracts, field offices, the cost of which was paid by the government, were established near the site of the proposed construction. Where this arrangement was not practicable, the architect or engineer was paid an agreed amount for the overhead costs of his office in which the work was done. Except for the earlier contracts, however, most of these design contracts were on a lump-sum basis, the lump sum being determined according to the estimated design cost, plus overhead and profit.

There were also numerous contracts for surveys, for engineering investigations and reports, and other technical services. Technical and clerical personnel were obtained under contract for stations which lacked the staff needed to supervise work. Other contracts provided for technical reports on CPFF contracts, estimates of cost of lump-sum contracts, etc.

Other categories in this service contract group, as contracts for professional services were designated, included land appraisal and survey, auditing and accounting, power service, management and operation (one contract in connection with the construction equipment repair depots at Vernon, Calif., Londsdale, R.I., and McAlester, Okla.), and miscellaneous, such as water supply and natural gas.

True-Cost Contracts

True-cost contracts were essentially CPFF contracts without a fee. They involved construction to aid in the war progress, but were, for the most part, concluded with municipalities, so that the contract costs were solely those of actual construction. Of the 23 true-cost contracts awarded, 17 were with the city of Chicago and covered the building of bridges over the drainage canal. Of the remainder, two dealt with floating drydocks, one with the rehabilitation of the railroad from Kinston to Morehead City, N.C., one with the provision of sewage facilities at NSD Scotia, N.Y., one with the city of Dearborn, Mich., in connection with the naval training school there, and one with facilities at Atlanta, Ga.

Informal Contracts

A practical tool which the Bureau developed during the war was the informal contract. Authority for Supply Officers to contract informally for minor amounts of work had existed for years, but in August 1943, this authority was enlarged to permit certain Public Works Officers to make informal contracts for work amounting to $2,000 or less and for architectural-engineering services amounting to $5,000 or less. In general, this authority was granted to Naval District, Naval Operating Base, and Navy Yard Public Works Officers. It was later extended to include those officers at training stations, air stations, and other large activities having Public Works Officers.

The informal contracts were not assigned Navy numbers. The Public Works Officer obtained oral or written bids on work which fell within the money limitations. He then asked for a written price bid from the contractor selected, and completed the contract by writing "Accepted" on the bid.

In July 1944, informal contracts were authorized for maintenance, repairs, alterations, or new construction, costing between $2,000 and $5,000. For work in this category, it was necessary to use a brief specification setting forth the wages to be paid employees used on the work. At first, it was

necessary to get prior Bureau approval of architectural-engineering informal contracts, but not for work contracts. Later, all informal contracts could be made by the authorized officers, without prior approval.

Civil Works Contracts

The civil-works contracts covered the work under the cognizance of the Bureau of Yards and Docks, in industrial plant facilities used by other Navy bureaus, principally the Bureau of Aeronautics, the Bureau of Ordnance, and the Bureau of Ships. In some of the contracts the amount included both the civil works and the procurement and installation of machinery, tools, and equipment, which remained under the jurisdiction of the originating bureaus. In some, the Bureau of Yards and Docks had jurisdiction of the entire work covered by the contract, including machinery, tools, and equipment. In others, facilities were furnished by the government at government expense.

Contract Renegotiation

In 1942, United States legislation provided for the formation of a war contracts board. The purpose of this board was to investigate and, if found necessary, renegotiate government contracts of $100,000 or more, held by civilian contracts. The board made a study of contracts awarded between 1930 and 1940 and, in addition, of a few contracts which were many years older. This study was conducted so that the board could determine what would be a fair profit on various types of contracts.

It was the board's responsibility to obtain from firms holding contracts, information upon which to determine the amount of profit made. If the contract price was found to be excessive, the contractor was directed to return the excess profit to the government; any uncompleted portion of the contract was renegotiated. The contractor could appeal his case to the secretary of the Navy.

Further legislation, in 1943, revised the previous measures. The minimum contract amount was raised to $500,000 and the contractor was allowed to appeal his case to the tax court. Responsibility was shifted from the board to the contractor, in that the contractor was compelled to file his contract with the board; hence, it was no longer necessary to seek out the contractor. A heavy penalty was imposed on contractors who failed to file.

The Army had a similar board for its contracts, and in instances where one contractor held both Army and Navy contracts, the case would be referred to the board having jurisdiction over the larger amount of the money involved.

A representative of the Bureau of Yards and Docks, performed liaison duties in connection with the war contracts board's work on construction contracts. he supplied information on the integrity and performance of contractors whose contracts were coming under the scrutiny of the board.

In September 1945, the Secretary of the Navy directed the Bureau of Yards and Docks to resubmit to the Secretary's Office for reapproval all public works projects previously approved, on which construction had not been completed on or prior to August 14, 1945.

In compliance therewith, three categories of projects were resubmitted, listing 713 approved projects under contract, 441 approved projects not under contract, 240 projects being processed but not approved. In the first and second categories, approximately 10 percent of the 1,154 projects were cancelled or reduced in scope, representing a total saving of approximately $63,241,875. Projects in process were carefully reviewed and those no longer essential were also cancelled.

Included in these cutbacks were contract terminations made immediately after V-J Day but resubmitted for confirmation from the Secretary's Office. These terminations were effected as the result of a survey started by the Bureau as early as Mary 1945 to determine projects that could be cancelled, reduced in scope, or continued after V-J Day.

Materials and Equipment

While the modified forms of government contracts enabled the Navy to get its construction work under way quickly and with a maximum amount of flexibility, their use did not assure an adequate supply of materials and equipment. True, these construction essentials were readily available on the markets which existed early in the defense program, but the overall expansion quickly drained reserves and taxed the ability of American industry to make all deliveries as required.

The need for providing constructed units in the proper order of importance led to the creation of such agencies as the Office of Production Management and the War Production Board. These organizations had the power to determine the relative urgency, the priority of projects. Within the directives

Material Assembly Building, Norfolk Navy Yard

of these control agencies the Navy administered its construction priorities system, and when priorities became an incomplete answer to the problem of supplying project needs, the Navy administered further controls, such as quantitative allocations of restricted materials and estimates of material requirements.

Priorities and Allocations

By direction of the Secretary of the Navy, under letter of October 15, 1940, the priorities system was instituted in the Bureau on October 20, 1940, in the War Plans Section, as a unit dealing with materials, priorities, and chemical warfare. On May 15, 1941, this unit was separated from the War Plans Division and established as an independent section, and on December 1, 1941, the Priorities Section was integrated as the Priorities and Expediting Division in the Progress Control and Statistical Department. The constantly changing demands on production and urgency of material needs were reflected in various orders and regulations promulgated by the Office of Production Management and the War Production Board, necessitating additional work and changes in procedure in the Priorities and Expediting Division. This division became the Priorities, Allocations, and Scheduling Division, and at the peak of its growth was composed of the following sections: Priorities, allocations, lumber liaison, scheduling, WPB appeals, and limitation order review.

Ratings and re-ratings. -- The Priorities Section, in general, was responsible for the following:

1. Prime ratings of Yards and Docks contracts.

2. Contacts with civilian government agencies, such as Federal Public Housing Authority and Federal Works Agency, in connection with priorities for war housing, utilities, roads, sewers, and water systems which benefited the Navy.

3. Coordination of priorities and the expediting

Pontoon Causeway on a Normandy Beach, June 10, 1944

of emergency rating applications to the Army and Navy Munitions Board, in connection with advance-base procurement contracts.
4. Out-of-line ratings, emergency ratings, and general expediting in connection with Navy, civil works, or plant facilities contracts under supervision of the Bureau of Yards and Docks.

5. Review of and recommended action in connection with certificates of necessity.

The first directive prepared by the Priorities Committee of the Army and Navy Munitions Board was dated August 5, 1940, and was forwarded to the services by letter dated August 12, 1940. This document established ratings in the classifications AA, A, and A-1 through A-10. The Priorities Section was authorized to assign preference ratings to contracts or orders (for critical items only); the prime contractor, in turn, was permitted to extend rating assignments to sub-contractors when necessary to insure on-time completion of contracts. A new directive, superseding the first one, was issued on November 27, to relieve congestion in the A-1 classification, which was divided into A-1-a, A-1-b, down to A-1-j. These changes in classifications necessitated a review and re-rating of all contracts. On August 20, 1941, a third directive was issued by the Army and Navy Munitions Board, which again required a review and re-rating of all contracts.

After December 7, 1941, the changes in the demands on industry were rapid. Between that date and June 12, 1942, a total of 26 amendments were issued and distributed to the services, each amendment requiring re-rating of contracts and realignment of programs, in addition to classifying and rating new contracts and expediting individual orders. New priorities instructions, issued September 18, 1942, abandoned the priorities critical list and rescinded authority for extension of preference ratings to orders for materials on that list. These instructions also provided specific instructions for obtaining higher-than-routine preference ratings.

On April 1, 1942, the Army and Navy Munitions Board issued a "List of Prohibited Items for Construction Work," the intent of which was to conserve scarce materials for use in aircraft, ships, guns, tanks, and other vital weapons of war. The

prohibited list was amended or changed from time to time, depending upon the supply of materials, and, after October 1942, the administration of this prohibited list was handled by a separate section of the Priorities Division.

A field expediting service was established by the Bureau² in January 1942. This service eventually was absorbed by the offices of the Superintending Civil Engineers.

On June 12, 1942, a new Army and Navy Munitions Board directive superimposed new ratings of AAA, AA-1, AA-2, AA-3, and AA-4, over the rating pattern established the previous year. Again, it was necessary for the Priorities Section to re-rate hundreds of contracts. From time to time thereafter, revisions were made in the ratings assignable to certain portions of the Navy procurement program.

This rating pattern remained in general effect until July 7, 1945, at which time the rating structure was modified to AAA, MM-AA2, AA2, AA-2X, AA-3, AA-4, and AA-5. The MM was used to designate military contracts.

It was necessary to re-rate certain contracts which were not expected to be completed before January 1946. On August 17, 1945, the War Production Board revised its basic priorities and CMP controls. Military controlled-materials allotments were cancelled on August 17, and MM ratings were substituted. Cancellation of all other allotments for controlled materials was effected on October 1, 1945.

The issuance of prime preference rating certificates, the re-rating of contracts, and the processing of applications for AAA ratings constituted most of the work of the section.

During the operation of the Controlled materials Plan, described later in this chapter, it was necessary to tie in the CMP allotment and the preference rating certificate, and a CMP work form was used within the Bureau for this purpose. Procedure of rating was as follows:

1. Prior to award of contract the project manager submitted to the Priorities Section information as to the location, approximate cost, estimated date of completion, type of contract and number, and general description of the proposed work.

2. A preference rating was assigned on the basis of the information.

3. Project information and preference rating were forwarded to the Statistical and Material Requirements Division for allocation of Class-A controlled material.

4. Information, including the preference rating and the certificate serial number, was sent to the project manager.

5. When daily notices of contract awards showed that the contract had been awarded, the rating certificate was completed, executed, and forwarded, the original to the contractor, one copy to the officer in charge of construction, one copy to the project manager, and one copy with the original project information attached was retained in the files.

Rating of contract changes was handled in the same manner as the original rating. Prior to March 25, 1943, it was necessary to issue a new certificate for each contract change. On March 25, 1943, authority was obtained to extend prime ratings by use of an endorsement on a form letter, which simplified the work, both in the Bureau and in the field.

Under authority of the Army and Navy Munitions Board priorities directive of October 8, 1943, the Priorities Section re-rated to AA-1 such orders or portions of contracts as were necessary to complete expeditiously the various contracts. Monthly reports of the value of ratings issued against an allowable total value were prepared and forwarded to the Army and Navy Munitions Board.

The investigation and processing of applications for AAA ratings comprised the greatest activity of the section. It was necessary to process these applications through the War Production Board, who reviewed the application and, upon approval, issued the rating. The field, in requesting such rating assistance, was supposed to furnish detailed information pertaining to urgency, order number, dealer, manufacturer, quantity, description, value, delivery data, other potential sources of supply, and interference to other orders in the manufacturer's plant if the new order was assigned AAA rating. It was necessary to supplement each case with factual and authoritative data before it could be forwarded via the Army and Navy Munitions Board to the War Production Board.

The investigation of AAA-rating applications was, in a large degree, a screening process. Not all requests from the field for AAA ratings were forwarded to the Army and Navy Munitions Board. In some cases, check-up with the manufacturer

Interior of Sub-Assembly Shop, Norfolk Navy Yard

revealed that delivery could be made reasonably close to the required date. In some cases of extreme emergency, where the manufacturer's plant was loaded beyond capacity, the priorities officer, through his acquaintance with overall conditions and by consultation with the proper WPB division, found a more satisfactory source and accordingly notified the officer in charge of construction. The issuance of AAA ratings might or might not solve the problems, so it was up to the officer handling the cases to determine the action necessary to bring relief, and to follow through until that relief was obtained.

On certain highly urgent contracts an officer was assigned, in addition to his regular duties, to follow through the expediting of a contract from award to completion. This involved constant contact with the project manager, the officer in charge of construction, and the contractor.

Products Under Allocation Control. -- The Allocations Section, as such, was established in the early part of 1942. Prior to that time the allocation of steel plate, one of the first items to be allocated, in November 1941, was handled under the Priorities Section. As the demand for other products, monthly end products, grew and the supply became insufficient to meet the demands, these products were placed under allocation control. In general, the Allocations Section acted as the bureau's central clearing house to obtain release of materials other than controlled materials, or to obtain authorization to procure items the delivery or production of which was controlled by limitation or conservation orders issued by the War Production Board. The number of items acted upon varied from time to time, depending upon the availability of the item and the necessity for restricting production or distribution. Lumber was handled by the Allocations Section until August 1942, when a Lumber Liaison Section was established to deal exclusively with lumber problems.

A list of items for which the Allocations Section obtained release or authorization included acetone, air-conditioning and refrigeration equipment, aluminum, asphalt and tar products, calcium chloride, calcium hypochloride, chloride of lime, coal stokers and boilers, commercial printing equipment, commercial trucks and passenger cars, compressors, construction machinery, conveyor machinery, copper, dry-cell batteries, dry-cleaning equipment,

electric fans, electric switch gear, elevators, fans and blowers, fibre shipping containers, floor cleaning machines, freon, heat exchangers, industrial power trucks, industrial vacuum cleaners, internal combustion engines, laundry machinery, machine tools, metal shipping drums, methyl chloride, military transport vehicles, natural gas, office machinery, oil burners, paper, pthalic acid resin, railroad turnouts, relay rail, safety equipment, saran, scales, screen wire, sewing machines, steel, tires and tubes, tractors, typewriters, vinylidene chloride, woodworking machinery, and X-ray equipment.

A Shipping and Transportation Unit was established in the Allocations Section on May 18, 1942, in order to centralize requirements and forecasts for shipping as well as to obtain reservations for cargo space for all overseas contractors. This was necessary because of the hazardous and difficult shipping conditions between the mainland and the Bureau's island projects in the Atlantic Ocean, beginning in April, when enemy submarine activity became effective. The needs of various contracts were combined by unit, and arrangements were made to concentrate cargoes so that full shiploads might be assembled at certain shipping points. Also, a higher urgency rating for shipping was successfully applied for, so that the backlog of cargo could be moved. Later, with the decrease in submarine activity and the decrease in construction activity, such detailed control by the Bureau was not required.

Automotive transportation, as handled by this section, was considered in two classes:

1. Procurement of commercial vehicles for direct Navy use and for use on CPFF contracts.

2. Procurement of military type vehicles, more specially those suited for overseas and combat type duty.

On February 2, 1942, all new 1942-model trucks, trailers, passenger cars, station wagons, and miscellaneous automotive equipment, such as third-axle attachments, dollies, etc., then held in dealers' hands were frozen for WPB allocation. This was known as the "Civilian Stockpile." The Allocations Section secured necessary releases of required vehicles from this stockpile. In 1943, the section's activities in connection with commercial vehicles was absorbed by the Transportation Branch of the Office of the Assistant Secretary of the Navy.

Military transport vehicles were procured by the various bureaus, the Marine Corps, and the Coast Guard, from the Army, through assignments made by the War Department Conference Group for Motor Transport Vehicles of the Munitions Assignment Committee (Ground). The division head acted as Navy member on this conference group until January 1, 1944, when representation was assumed by the Transportation Branch, Office of the Assistant Secretary of the Navy. The duties involved in this representation were the collection and formation of monthly requirements and justification therefor, and the clearing of shipping instructions from the various activities to the Army.

Tractors. -- The distribution of track-laying tractors was initially controlled by the priorities system, but, due to the great need, both for continental and overseas construction and for use as military equipment, the demand soon far outran the available supply, and on February 19, 1942, the War Production Board placed a strict control over the sale and distribution of that equipment. In order to meet, as far as possible, the urgent demands of the armed services, 85 percent of the total tractor production was allocated to the military. This production was contracted for all services by the Army Corps of Engineers. To provide the most equitable distribution among the services the assignment of this production was made by the War Department Conference Group for Tractors of the Munitions Assignment Committee (Ground).

During the balance of 1942, the Bureau was able to secure release of tractors for Navy contractors, from the War Production Board, without affecting the military allotment. The Conference Group also soon developed a tractor spare-parts program which provided a more equitable distribution of available spare parts among the services.

The head of the Priorities, Allocations, and Scheduling Division represented the Bureau on the War Department Conference Group until June 30, 1944, when the representation was assumed by the Advance Base Department.

Railroad turnouts. -- In July 1942, a survey of requirements for railroad rail and track accessories indicated that a considerable monetary saving to the Bureau's program would be obtained through quantity purchase and stockpiling of railroad turnouts. A saving in construction time would also be made, as the turnouts would be available from stock and would not have to be manufactured. The Bureau standardized on two sizes and procured a

total of 3,750 turnouts, of which all except 61 were used.

Tires. -- In November 1944, the truck tire situation became critical for lump-sum contractors. The Inter-Agency Appeals Committee of the War Production Board had established an essentiality list, for use by the Office of Price Administration in the issuance of tire certificates, on which construction activities were placed in Class III. This classification was too low for many of the contractors on Navy work, and the Allocations Section, in cooperation with the Navy Rubber Director's office and the Inter-Agency Appeals Committee, devised procedure for appealing for a higher classification. Twenty cases were appealed, all successfully, before the essentiality list was revised, making this procedure unnecessary.

Lumber.-The Lumber Liaison Section was established in August 1942. Prior to that time, lumber was handled by the Allocations Section. In early 1942, the Bureau's contractors were competing with each other, as well as with all other construction and military procurement offices, for the limited supply of lumber. The result was highly wasteful and created considerable confusion, both for the buyers and for the lumber industry.

Competition for lumber, and the minimum grades required, caused upgrading in the material purchased in order to obtain any deliveries. The Bureau directed the use of grades developing stress values of not more than 1,200 pounds per square inch except for timber floating drydock construction, where procurement of grades developing stress values of 1,400 pounds per square inch was permitted. This directive was designed to permit the procurement of higher-stress-value grades by the Bureau of Ships, without competition. Other agencies, however, did not impose similar restrictions, and the Bureau's program was penalized by this action.

The Army-Navy Munitions Board was requested to establish a policy of procurement, applying to all agencies, which would eliminate the wasteful use of higher grades and insure delivery of all grades and species to the most urgent military demands. On August 20, 1942, all military agencies concerned concurred in a general procedure of central lumber procurement, whereby the Army Corps of Engineers arranged for the purchase allocation of all lumber and plywood for the Army, Navy, Maritime Commission, Panama Canal, and War Shipping Administration, and established a procedure covering the general manner of purchase allocation.

The Navy Department organized the Navy Lumber Coordinating Unit, to coordinate the conflicting demands of all bureaus of the Navy Department, the U.S. Marine Corps, and the U.S. Coast Guard, so as to provide a medium through which the using Navy services could act.

The duties of the lumber Liaison Section were to act as liaison with the field, the Central Procuring Agency, and other government agencies in the procurement of lumber; to facilitate releases from limitation orders; to check expediting with the Navy Lumber Coordinating Unit; to check market conditions; to recommend specification changes and grade substitutions to match lumber requirements with market availability; to record current requisitions for the development of trends; and to represent the Bureau in all matters affecting procurement of Bureau lumber. In order to better serve the Bureau's requirements, branch offices of the Lumber Liaison Section were operated at Memphis, Tenn., and at Portland, Ore.

Scheduling. -- A Scheduling Division was established in the Progress Control and Statistical Department on April 15, 1943, to coordinate and dispatch all responsibilities of the Bureau in connection with critical common components.

The War Production Board, on February 26, 1043, promulgated general scheduling order M-293. This order was designed to maintain close control of the production of certain components for which manufacturing facilities were inadequate. Selected components were classified in accordance with relative scarcity, and production schedules were frozen for each factory without regard to priorities (except as they might influence initial scheduling). The scheduling of these critical common components became effective June 1, 1943.

On march 26, 1943, the Office of Procurement and Material issued a directive by which various bureaus were appointed as Navy sponsors for certain critical common components. The Bureau of Yards and Docks was named sponsor for the following: circuit breakers, coal pulverizers, coal stokers, diesel and gas engines (non-marine), hydraulic turbines, hydro-electric turbine generator sets, industrial-type instruments, power boilers, power-frequency changers, and pressure vessels.

Seabees Manning an Anti-aircraft Machine Gun Mounted on Tractor

The component scheduling procedure was designed to give manufacturers participating in the principal war programs the relation in time and quantity between the orders placed on them and the building schedules. The Scheduling Division was concerned with the operation of the WPB order as regards the scheduling and expediting of products in behalf of all activities of the Bureau, and as regards the products sponsored by the Bureau in behalf of other bureaus (except the Bureau of Aeronautics).

Sponsor-bureau procedure was terminated by the Office of Procurement and Material on October 27, 1942, and thereafter the Scheduling Division was concerned only with the operation of WPB Order M-293 in connection with the scheduling and expediting of products in behalf of the Bureau of Yards and Docks. Improvements in delivery schedule of these components were effected through loans from other agencies who possessed more favorable positions on the order boards or by appeal to the War Production Board for preference over other agencies which were scheduled to receive earlier deliveries of the same items.

On January 16, 1944, the Bureau completed arrangements for participating in the Engine Parts Coordinating Office (EPCO) of the Bureau of Ships, at Detroit, Mich. This office collected complete information on the status of internal combustion engine critical common components and accessories required by engine manufacturers, which were designated from time to time by the Bureau of Ships and participating bureaus.

Structural Assembly Shop, Philadelphia Navy Yard

The EPCO identified and combined the several engine builders' requirements on each supplier to develop the true Navy requirements on the various components suppliers and vendors. Action was taken to secure required component-delivery schedules and, when delivery promises were out of line, to investigate other possible sources. Allocation of production among the various Navy programs was worked out in the order of urgency, when there was an overall shortage of capacity. This did not affect the procedure concerning manufacturers' schedules for completed engines or for engine subcomponents for trucks or tractors.

Relations with War Production Board. -- The WPB Appeals and Limitation Order Review Section was originally established in October 1942, as the Conservation and Surplus Material Section, for the purpose of formulating and directing conservation measures within the Bureau, in accordance with the "Directive for War-Time Construction." It had been recognized, early in 1940, that materials normally used in the construction of naval facilities would inevitably become scarce and that a conservation program was essential. The first Bureau directive, entitled "Economies in Construction," was issued on August 27, 1940. The first Army-Navy Munitions Board "List of Prohibited Items for Construction Work" was issued to the field on April 16, 1942. The "Directive for War-Time Construction" of May 20, 1942, approved by the Secretaries of War and Navy and the chairman of the War Production Board, established the "List of Prohibited Items for Construction Work" as the basic guide to the use of materials and end products

in all construction. It soon became apparent that the increased demands for materials incidental to the manufacture of munitions of war, plus the tremendous war building program, together with the loss of certain producing markets, had created a scarcity of certain materials normally used, directly or indirectly, in the Bureau's construction program. This condition was reflected in the various orders issued by the War Production Board, restricting or prohibiting the use of materials and end-products of nearly every classification and description. The job of putting idle materials to prompt use in the war effort developed into one of paramount importance.

The conservation policy adopted was based on the intent of the "Directive for War-time Construction" and the following basic features were included in the directives issued to carry out this policy:

1. Unnecessary construction was to be eliminated.

2. Construction of a temporary nature consistent with sound engineering principles was to be employed.

3. Maintenance was to be kept to the minimum consistent with necessary operational requirements.

4. Use of critical materials was to be eliminated or decreased to the minimum amount practicable, by re-design, substitution of less-critical materials, or use of increased allowable working stresses.

5. Investigation and use of available surplus materials and equipment was to be made prior to placing of orders through the usual procurement sources.

6. Scrap material was to be collected, classified, and segregated as to kind, and processed back into proper using channels.

7. Conservative use was to be made of all utilities.

The Conservation and Surplus Material Section worked in close cooperation with the War Production Board, the Office of Procurement and Material, and the Army, in effecting revisions of the "ANMB List of Prohibited Items for Construction." It also reviewed all new and amended WPB orders and made comments as to the effect of the proposed action on the procurement program or requirements of the Bureau. The various amendments and revisions of the "ANMB List of Prohibited Items for Construction" and the WPB order were made because of the fluctuation in the capacity of the raw material industries to produce the materials, of the fabricators to fabricate, and of the manufacturers to make the various end products required. Numerous WPB appeals, as well as requests for exception to the ANMB Prohibited List, were forwarded to the Bureau for action. These cases were reviewed by the section, and releases recommended and expedited, after consultation with project managers and various specialists of the Bureau had established essentiality.

The tremendous naval shore establishment building program that followed December 1941, due to the magnitude and the speed with which it was conceived and carried out, produced a by-product of surplus materials. As a large part of the Bureau's building program was performed under cost-plus-a-fixed-fee contracts, materials purchased became the property of the government. It was decided that prompt and effective efforts to put these idle materials to work would be a permanent contribution to the conservation program. A method was inaugurated, in August 1942, to advise the officers in charge of construction of the availability of surplus materials, and, as a result, considerable quantities of material were transferred from one naval activity to another, and in some cases disposed of by sale.

On June 1, 1943, the Bureau adopted the policy of doing its contract work by lump-sum or unit-price contract, and of terminating the CPFF contracts and performing the unfinished work by lump-sum contract, wherever practicable without interfering with the progress of the work or increasing the cost. To counteract the natural tendency of the lump-sum contractors to do business as usual and purchase their materials from commercial sources, the section inaugurated the personal contact method of disposition of surpluses, through the medium of surplus materials boards established in each Superintending Civil Engineer area. These boards, established in July 1943, went from contract site to contract site, and, by personal contact with the officers in charge of construction, directed the disposition of surplus materials. The residue, not needed immediately, was concentrated at three storage points, for later distribution to new contracts. The work of the boards had been completed by January 1, 1944.

On March 3, 1944, the activities of this section in connection with the redistribution and disposal

of surplus materials were transferred to the Surplus Materials and Equipment Division of the Progress Control and Statistical Department, and the title of the section was changed to WPB Appeals and Limitation Order Review Section.

Material Requirements

The natural tendency of the priorities system was to overcrowd itself in the higher priority classifications. As has been shown, this inflationary action was mitigated by revising the priority rating schedules from time to time and re-rating existing projects in accordance with each revision. Gradually, it became apparent that a different type of control would have to be developed to supplement the priorities system.

As the basic materials, such as steel, copper, and aluminum, were most seriously affected by the shortcomings of the priorities system, additional controls were first applied to them.

In July 1942, the War Production Board devised an allocation procedure by which monthly quotas were assigned to using agencies. Within those quotas the using agencies performed their work. In November 1942, this procedure was expanded to become the Controlled Materials Plan. The using agencies were given allotments of carbon and alloy steel, copper, and aluminum, defined as controlled materials, and were required to stay within those allotments in carrying out their respective production or construction programs. Such allotments were governed by the availability of the material and the requirements and relative importance to the war effort of the various programs of the using agencies.

Reports of requirements. -- Starting in 1941, as these various controls and plans were made effective, it was necessary for the services to prepare requirement reports on the raw materials and critical components that were planned for use.

The first reports made by the Bureau of Yards and Docks were prepared by a small unit of the War Plans Section. This unit was transferred, in October 1941, to the Progress Division, which in December was expanded into the Progress Control and Statistical Department. The unit responsible for estimating material requirements became the Material Forecasting Section.

In January 1942, the Office of Procurement and Material (known as OP&M) was established as part of the Secretary's office. Among other duties, OP&M was vested with authority to consolidate requirement reports, made by individual bureaus, into an overall Navy report.

Most of the early requirement reports which the Bureau of Yards and Docks was called upon to prepare covered all requirements which the Bureau might have for material purchased as such or included in end products, whether procured directly by the Bureau or by its contractors. The problem of predicting such requirements for the Bureau's large construction program was exceedingly difficult. The construction volume was enormous and was geared to an abnormally high rate of speed. Each contractor was responsible for procuring his own materials, and it was not feasible to canvas each project every time a requirement report had to be made. Furthermore, these reports had to cover periods which were too far in the future to be identified with specific projects, and they necessitated estimation on an overall construction basis.

This led to the decision that the only approach to the problem lay in predicting the future dollar volume of construction by months, and the development of material requirement factors based on the predicted dollar volume. Monthly charts of past expenditures were prepared and studied in their relation to planned expenditures. Material factors -- namely, quantities of specific materials required per dollar of expenditure -- were determined by listing facilities set up in the naval appropriation acts, making rough estimates of the material required for each facility, and relating the total quantity of material for all facilities to the total dollars appropriated. Factors derived in this manner, multiplied by predicted monthly expenditures, were considered to be the monthly requirements of materials to be reported.

As the material situation became more critical and controls were tightened, the need for more accurate reports became increasingly necessary.

During the spring of 1942, some excellent information was obtained from the contractor working at Corpus Christi, Texas. This consisted of a complete breakdown of costs by trades and by types of construction, together with actual material quantities, including both material purchased, as such, and material used in such major end products as boilers, radiators, and electric panel boards.

With the Corpus Christi figures as a basis, a new system of estimating factors was inaugurated. This

Barracks for Enlisted Personnel, Kaneohe Naval Air Station

entailed the establishment of certain end users, each of which comprised a particular type of facility constructed under the Navy programs, such as barracks, magazines, and storehouses. The estimated or actual cost and the bill of material were determined for representative types of construction within each end use. Factors for each material which might possibly be the subject of future reports were computed by dividing the quantities listed in the bill of material, by the total cost of the building or utility.

Further, the amount of money to be spent by the Bureau on each type of end use was estimated on a percentage basis. These percentages, or coefficients as they were later called, were developed by breaking down into costs of end use types the amount set aside in the naval appropriation acts for Bureau of Yards and Docks construction, totaling the money estimated for each end use, and relating this sum to the total amount appropriated. The summation of the products of the factor for each end use, multiplied by the coefficient for that

Highway Scene on Guam, November 1945

end use, resulted in an overall weighted factor for each material. Further studies of data obtained from the field were applied to the factors from time to time.

Controlled Materials Plan

On November 2, 1942, the War Production Board announced the Controlled Materials Plan, which was to become effective during the second quarter of 1943. That quarter was to be a transition period, at the end of which the plan was to become fully effective.

For purposes of the CMP, all products containing controlled materials were divided into Class A and Class B products, which were listed in an official publication issued, intermittently, by the War Production Board. Class B products were items normally sold on the open market, for which allotments by claimant agencies were deemed impractical by the WPB. In addition, controlled materials, used as such in their basic state without further processing after delivery from the mill or foundry, were included in the plan.

The claimant agency prepared quarterly requirement reports and made allotments of controlled materials both for "controlled materials used as such" and for controlled materials required in the manufacture of Class A products, exclusive of the Class B components thereof. Class B products came under the jurisdiction of the appropriate industry divisions of the War Production Board. These divisions prepared quarterly requirement reports, based, in part, on similar reports submitted by the claimant agencies, and made allotments to consumers manufacturing such products. The priorities system was retained for procurement of Class B products and materials other than controlled materials.

Programs were established by each claimant agency, segregating its production into urgency classifications based upon relative importance. The claimant agency was required to submit to WPB a quarterly report on the controlled material and Class B Product requirements of each program, approximately one quarter in advance of the subject quarter. Based on reports submitted and available supply, quarterly allotments of material were issued to the claimant agencies by WPB. The allotment made to the Navy Department, as a claimant agent, was reallotted by OP&M to the bureaus, in accordance with estimated requirements. Material was reallotted by the bureaus to their individual producers and contractors. Accounts were maintained by each claimant agency and bureau, and reports of total material issued and unallotted balances were submitted periodically by OP&M to the War Production Board.

The theory behind the plan was that specific control over the use of steel, copper, and aluminum, by the allotment method, would limit the use of other critical materials. Provision was made for declaring other materials to be controlled materials whenever the War Production Board deemed it necessary.

Organization. -- The Statistical and Material Requirements Division of the Bureau of Yards and Docks was charged with the administration of the Bureau's part of CMP.

At the time, there was considerable pessimism as to whether the plan, which was developed primarily for production, would operate successfully for construction, inasmuch as its successful operation lay in advance planning and long-range scheduling. War exigencies made it impossible for Navy construction to be planned in detail very far in advance, and only a small part of the construction undertaken lent itself to any sort of uniformity of design.

Realizing these handicaps, the Bureau of Yards and Docks acted expeditiously to get the plan into effect, in the belief that the experience gained by operating during the second quarter of 1943 (which was optional) would give invaluable aid to efficient operation after the first of July.

New York office. -- As the routine work load of the Statistical and Material Requirements Division of the Bureau had increased since Pearl Harbor, and there was every indication of further increase, it was obvious that a new group of employees would have to be engaged to take care of the additional burden.

By December 1942, the personnel of the Material Forecasting Section had increased to sixteen engineers and five clerks. However, with the advent of CMP, it was believed that about 131 engineers would be required, together with sufficient supporting clerical assistance. The time table established by the plan allowed only two months for the creation of a complete organization, with the result that the following obstacles were encountered:

1. Two months was insufficient time for the Civil

Ordnance and Diesel Shop, Charleston Navy Yard

Service Commission to establish a new office of the required size and talent.
2. Office space and qualified personnel were not available in Washington.

3. Out-of-town technical personnel could not be induced to move to Washington.

Thus it became necessary to solve the problem by:

1. Establishing the organization on a contractor's payroll basis.

2. Obtaining space and personnel in New York.

During the first two weeks of December 1942, sixteen engineers were sent to New York, to form the nucleus of the organization to be established there, and 16 men were retained in Washington to carry on the work there.

As the Bureau had elected to go under CMP in the second quarter 1943, it was necessary to prepare requirement reports for that quarter, for submission to OP&M by December 15, 1942. The reports were made by the existing staff, in the Washington office, from such information as had already been assembled.

Under CMP, the Bureau of Yards and Docks was requested to submit its requirement reports by eight separate programs, as follows: advance base procurement; extra-continental public works construction; floating drydocks; continental public works construction, naval air stations; continental public works construction, Navy yards and stations; civil works construction; station major maintenance; privately financed private plant construction.

Requirements for most of the programs had to be estimated on the factor basis; individual coefficients were established, and from the coefficients a separate overall program factor was developed. In addition, a separate expenditure estimate was prepared for each program.

Washington office. -- Due to the close integration of the work of the New York and Washington offices, the two were considered as a single organization. The Material Requirements Division in New York was under the joint control of an officer in charge, located in New York, and the head of the Statistical and Material Requirements Division, located in Washington. The Controlled Materials Section of the Washington division performed the Washington CMP functions.

The New York office was established, primarily, as a service organization. Policy matters pertaining to the operation of the plan, changes in organization, preparation of CMP circular letters, and other such matters emanated from Washington. The New York office handled the great bulk of the

Pontoon Pier at Katchin-Hanto, Okinawa, May 1945

routine work called for by CMP, including transactions, accounts, reports on allotments, forecasting material requirements, and other such duties.

From the time of completion of the second quarter 1943 CMP report until March 1943, the duties of the Controlled Materials Section consisted of liaison work, estimates of controlled material requirements of new projects, and certain special reports.

The liaison work of the section was the most important duty which it had to perform. It was vital to the operation of the New York office that that office be kept constantly informed about all matters relative to CMP. Some of the data thus forwarded to New York were WPB priority regulations and orders; CMP regulations and directives; OP&M directives, memoranda, and reports; Bureau memoranda and circular letters; naval appropriation acts and addenda and public works projects approved by the Secretary of the Navy; new work forms, covering new construction projects; drawings and specifications, bills of material; daily contract award sheets; and award of contract letters from the field.

It was the further duty of the Controlled Materials Section to keep the New York office advised, by attending WPB and OP&M meetings, of pending changes in CMP procedure or construction policies which might effect materially the work of the office. Teletypewriter service was installed in each office to enable quick exchange of information.

One major change in the organization of the Controlled Materials Section occurred in the latter part of February 1943, when it was decided to transfer most of the new-projects estimating work to New York. This decision was motivated by (1) the inability to secure electrical engineers in Washington, (2) the availability of technical personnel for consultation in New York, and (3) the proximity of requirement data.

From this point on, the Washington office estimated controlled material requirements only for those new projects which varied from the standard types of Navy construction, and on which information had to be obtained in Washington.

The New York office of the Material Requirements Division was established December 1, 1942, at 521 Fifth Avenue.

Work was started on January 1, 1943, and in a few month's time, the office was in full operation. As the principal duty of the Material Requirements Division was the operation of the CMP, the division was organized into sections in accordance with the responsibilities which the division had to meet in order to administer the plan effectively. On February 1, 1943, the organization consisted of the offices of the Officer in Charge and the Chief Engineer, the Forecasting Requirements Section, the Allotment Computation and Distribution Section, the Record Section, the Procedure and Systems Section, and the Administration Section, with a total staff of 152 persons.

As previously mentioned, the system used in preparing estimates for the construction programs consisted of multiplication of estimated construction expenditures taken from the current monthly status reports by a summation of the product of factors for each end use, multiplied by coefficients for each end use. Factors were quantities of material-per-dollar cost, developed for each type of construction coming under the Bureau's cognizance. Coefficients were an estimated percentage of money to be spent for each type of construction. Factors were continually revised and refined to reflect changes in construction design and costs. After sufficient new work forms had accumulated, they were used to reflect trends in different construction types. When new types of buildings were added to the program, arrangements were made to get drawings and specifications in order that the Forecasting Section might make quantitative surveys. Factors developed from these quantitative surveys were weighted with factors developed for other types within the same end use, to arrive at a weighted factor for each end use, reflecting as nearly as possible the proper proportioning, by types, of the money spent within an end use.

The Allotment Section was established to receive allotments of controlled material from OP&M and, in turn, to extend allotments to the Bureau's consumers. Responsibilities also included receipt of controlled-materials requests from consumers, the screening thereof, the issuance of allotments to cover approved requests, and the maintenance of records (required under WPB regulations) by CMP programs, of such allotments to consumers, by quarters.

After V-J Day, rapid progress was made by WPB to accelerate the process of reconversion. On August 15, 1945, CMP was officially declared terminated, and instructions were given by the director of the Progress Control and Statistical Department to prepare for decommissioning as of September 30, 1945.

Construction Equipment

The CPFF form of contract and the wartime need for making the most efficient use of construction essentials gave the Bureau of Yards and Docks a primary interest in construction equipment. Previously, when work was performed by lump-sum contract, the problem of supplying adequate equipment to each job belonged entirely to the contractor. Under the CPFF form, the Navy had a direct interest in activities intended to provide the machines of construction.

To coordinate the central problems of equipment procurement, allocation, rental, repair, and depreciation, the Bureau of Yards and Docks set up a Construction Equipment Division in the Progress Control and Statistical Department.

The following were the most important of the problems met by this division: regular third party equipment rentals, third party equipment rented with recapture clause, contractor owned equipment used without profit, equipment purchased on CPFF contracts, equipment repair and rebuilding depots, allocation control of newly produced equipment, reassignment control of used equipment from closing contracts.

CPFF contractors were selected, in part, for the owned equipment which they were able to contribute to the work on a cost-without-profit basis,

but it was necessary to obtain additional equipment in large amounts from other sources, and in a market which was decidedly advantageous to the supplier. Office of Price Administration maximum rental regulations acted to limit the rental rates asked, although the classifications of equipment under regulations were so broad that, in many cases, they permitted owners to claim excessive rentals for old and inefficient items. Early leases were drawn without a recapture clause, with the result that rental claimed frequently exceeded the value of the equipment. To correct this condition, a standard rental contract with a recapture clause was developed, and its use was required after March 26, 1942. Much opposition to this type of contract later developed, and it was not always possible to obtain the necessary equipment under the terms of the recapture clause type of lease. In a few instances, it was necessary to commandeer third-party equipment in order to meet urgent war requirements that could not otherwise be satisfied.

The standard provision in CPFF contracts, to the effect that contractor-owned equipment would be made available as needed on the work and that the contractor would be entitled to reimbursement only for his out-of-pocket expense, appeared simple. The contract stipulated that depreciation could be paid for, up to fifty percent of the equipment's value when delivered on the job. This was satisfactory to the contractor when the equipment was moved to a job for an expected use of a few months to a year, but it became objectionable, from the contractor's standpoint, when change orders extended the life of the contract from two to three times its original expected duration. The determination of the value of equipment when delivered to the job, the extent of previous use, the value of betterments, the cost of interest, taxes, yard expense, overhead charges, and the like, involved endless differences of opinion, some honestly held and some arising from a willingness on the part of the contractor to take a profit beyond that intended by the contract. The amount to be expended on final overhaul to restore the equipment to its original condition, less ordinary wear-and-tear, was difficult to agree upon. It was necessary to recompute and renegotiate substantially all payments on contractor owned equipment.

Much equipment required for the construction of graving docks and other waterfront structures was of such a type that no contractor had, or could be expected to have, on hand. Such equipment was purchased by the contractor for the account of the government. The disposal of such massive and special items required careful attention to protect the government's investment. A considerable quantity of the more conventional types of equipment was purchased under similar conditions and proved to be of great value for transferral to other contractors and to advance bases. Practically the entire industrial output of new equipment during the war months of difficult procurement went to the Army and the Navy for front-line use. This, plus the fact that all suitable used equipment also was assigned to front-line use, left the continental stations and contracts badly stripped of needed equipment. The procurement situation was so serious at one time that the Equipment Division conducted an extensive survey to determine the total available supply of equipment which could be commandeered, if necessary, to meet wartime demands.

Construction equipment repair depots. -- It early became evident that equipment purchased under CPFF contracts and recaptured under lease terms would have to be made available for use in other contracts and to supplement new equipment for front-line use. In order to provide this service most efficiently to going contracts and to insure that the most suitable equipment was assigned to advance base use, three construction equipment repair depots were established at McAlester, Okla., Londale, R.I., and Vernon, Calif.

All construction equipment, when no longer required by a contract, was shipped to the nearest repair depot, where it was inspected and classified for reassignment either to continental or for advance base use. Overhaul of equipment for continental use was limited to that required to place the item in reasonably good operating condition. In the case of advance base types, the overhaul was complete in every respect and resulted in placing the items in a condition equivalent to new.

Floating construction equipment consisted of highly specialized types. These types were used in considerable numbers in the Bureau's construction program. It was necessary for the Equipment Division to have experts on its staff who were as capable as were those of the contractor. To obtain the required equipment at fair cost to the government., it was frequently necessary to have the War Shipping Administration requisition the equipment, as

Naval Hospital, Houston, Showing Permanent and Temporary Construction

WSA had control of floating facilities. The closing of accounts in the case of floating equipment was completely different from that of land equipment, and required the employment of experts familiar with ownership costs, repairs, appraisals, insurance, and customs of usage in connection with that type of equipment.

Surplus Materials and Equipment Division. -- Early in 1944, it became apparent that the redistribution and disposal of surplus material and equipment was shortly to become a major problem for the Bureau of Yards and Docks. Accordingly, on March 3, 1944, the Equipment Division was reorganized and redesignated the Surplus Materials and Equipment Division. The new division absorbed the Surplus Materials Sub-Section of the Conservation and Surplus Materials Section. Prior to this reorganization, surplus problems had been the joint responsibility of both activities. The new designation was primarily for the purpose of obtaining closer coordination on all problems pertaining to surplus.

In the early stages of the surplus problem, and even before the formation of the Surplus Materials and Equipment Division, the emphasis had been placed almost solely on redistribution and conservation of surpluses. The Bureau of Yards and Docks, recognizing the importance of this program, established surplus materials boards under each Superintending Civil Engineer, for the purpose of assisting the Bureau in making the best use of all material and equipment when it was determined to be surplus.

When first established, these boards made a complete survey of all contracts, and then proceeded to redistribute surplus materials and equipment to advance bases, other CPFF or lump-sum contracts, or stations, for maintenance use.

In the case of new lump-sum contracts, the officers in charge of construction and the public works officers were directed to specify the use of surplus materials to the extent that they were available, thereby reducing the contract price for new projects. It was found advantageous to establish surplus materials yards in some areas to store property temporarily, pending the development of plans for

Naval Supply Depot, Mechanicsburg, Pa.
General view of the depot, taken from the administration building tower, June 1945.

projects on which the surpluses could be used.

By early 1945, the surplus problem became of Navy-wide importance, and through the collaboration of the Chief of Naval Operations and the Secretary's office an over-all Navy procedure for handling surplus property was promulgated. How well the Bureau of Yards and Docks plan had operated was indicated by the close conformance of the new over-all plan to that formerly in use by the Bureau. The only change of importance was the establishment of district redistribution officers under the commandants of the various naval districts, instead of the continuation of the surplus materials boards under the Superintending Civil Engineers. However, the duties of the district redistribution officer paralleled those of the former surplus materials boards, and in all cases the district redistribution officers absorbed personnel from the Superintending Civil Engineer staff.

The Navy-wide program gave the Bureau of Yards and Docks thirty days in which to effect its own redistribution. Subsequently, the district redistribution officers received the lists of unassigned surpluses; they then published catalogues for distribution to all activities in the district, to other district redistribution officers, and to Army activities. Thirty days from the date of the catalogue, any unrequested residue was declared to be Bureau excess to the district redistribution officer, who, in turn, submitted the list to the cognizant disposal agencies as Navy surplus, for sale.

After the surrender of Japan in 1945, the emphasis swung sharply from redistribution to disposal. The district redistribution offices were disestablished in December 1945, and redistribution of property, to the extent necessary or desirable, again became a function of the Bureau.

The Bureau, in anticipation of the receipt of large surplus declarations and mindful of the fact that continental stations had been forced to operate throughout the war period with insufficient, undersized, obsolete, and badly worn equipment, conducted a survey to determine what equipment required replacement and what additional equipment was required by the continental shore establishment. As a result, equipment having a value in excess of $20,000,000 was transferred.

The Bureau disposed of its surplus property either by declaration to the proper disposal agencies or by redistribution to other governmental agencies and activities. Not only was the surplus material at the advance base depots declared, but the depots themselves, with the exception of Port Hueneme, were transferred to the Bureau of Supplies

and Accounts. ABD Port Hueneme was retained, and in addition to its other functions it received, unloaded, and declared surplus material returned from the Pacific area which had not been consigned elsewhere.

Labor

The owner-contractor partnership which was set up by the CPFF contract imposed upon the Bureau of Yards and Docks a direct interest in assuring an adequate and uninterrupted supply of labor to Navy construction projects.

As a result of labor and manpower problems which arose on the first big CPFF contracts awarded by the Bureau in the United States, the Bureau directed letters to its officers in charge in the field, requesting information on labor problems facing them in connection with the construction contracts. On receipt of this information, the Chief of the Bureau found it advisable to inform the labor section of the Office of Production Management of the necessity for the establishment of some uniformity throughout the country in rules governing such matters as overtime, working conditions, holidays, wages, in order to avoid excessive competition for the available manpower and to prevent unnecessary increases in cost. As a result of the Bureau's request and similar requests by other defense contracting agencies, the Office of Production Management called a meeting of all government contracting agencies and the heads of the building trades unions of the American Federation of Labor, in an effort to formulate a labor policy for government defense construction contracts.

After numerous meetings, the policy was announced in the form of a Building Trades Stabilization Agreement, effective July 31, 1941. This specified that wage rates found by the Department of Labor to prevail in an area at the beginning of a construction contract would last for the period of one year or for the duration of the contract, if shorter, before revision could be requested. Overtime was standardized at time and a half for work in excess of eight hours a day and for work on Saturdays, Sundays, and holidays. In addition, shift premiums were standardized, and certain other conditions were made effective for the benefit of both government and labor. It was agreed that there would be no stoppage of work for any cause.

A board of review, consisting of a representative of the government agencies, a representative of the Building and Construction Trades Department of the A.F. of L., and a representative of the Office of Production Management, was also established by the agreement, to interpret the provisions of the agreement and to act on any disputes arising thereunder.

The agreement was approved by the government contracting agencies and by the heads of the nineteen building and construction trades unions, and instructions were sent to all representatives of the contracting agencies and local officials of all the construction unions, indicating that compliance with the agreement was required. Although negotiated primarily for CPFF operations, the provisions of the agreement were made equally applicable to lump-sum contracts.

Due to the problems which arose out of interpretations of this agreement and the continued pressure for wage increases throughout the United States, it was found advisable to establish a Labor Relations Division within the Bureau, late in 1941. This division became responsible for the handling of all labor problems involving manpower, wage rates, salaries, overtime compensation, premium compensation, leave and leave pay, strikes, etc. This division also maintained necessary liaison with other offices and bureaus of the Navy Department, other government agencies, organized labor, and construction contractors.

Although the War Labor Board was established to hear labor disputes affecting defense contracts, the board of review established by the Building Trades Stabilization Agreement was the only board available to hear disputes in the building construction industry. As this board was under the jurisdiction of the War Production Board, conflict resulted, and it was found desirable to establish the Wage Adjustment Board to stabilize wages in the building construction industry. Therefore, the Secretary of Labor, together with the government contracting agencies and the heads of the building trades unions, established, through the Wage Stabilization Board to pass upon requests by local unions and construction contractors for changes in wage rates. The recommendations of this board were to be considered by the Secretary of Labor in making wage predeterminations under the Davis-Bacon Act for government contracts. The government agencies were represented by the Navy Department,

Materials Testing Laboratory, New York Navy Yard

the War Department, and the Defense Plant Corporation. The Navy's representative was the head of the Labor Relations Division of the Bureau. This board functioned in this manner until, by act of Congress, on October 2, 1942, the War Labor Board, previously operating by Executive Order, was given authority to stabilize wages and working conditions on all activities throughout the country.

By general order, the National War Labor Board delegated authority to the Wage Adjustment Board to act on all adjustments or increases in wage rates paid to laborers and mechanics employed in the building construction industry. In 1943, when the Bureau terminated large CPFF contracts and reverted to lump-sum contracting, it was determined inappropriate for a representative of the Navy to act on petitions affecting lump-sum contractors and petitions of contractors on private construction work. Therefore, after conferences with other contracting agencies, the National War Labor Board was requested to reconstitute the Wage Adjustment Board as a nine-man tripartite agency with three representatives each, of the public, industry, and labor. This was accomplished in October 1943, and thereafter the Labor Relations Division of the Bureau maintained liaison with the Wage Adjustment Board for the Navy Department.

Although the Board of Review and the Wage Adjustment Board continued to function, the former

considered only problems arising under the Building Trades Agreement; whereas the latter considered wage problems and did not consider working conditions, jurisdictional problems, or work stoppages. As the influence of these boards spread throughout the country, wage problems and working conditions became more stabilized. However, the quantity of war work being performed, together with the great numbers of men needed by Selective Service, made the competition for manpower the main problem of concern to the government, and the wage problem then became secondary to the manpower problem. Shortages became so serious that it was frequently necessary for contractors to recommend deviation from the stabilization agreements in order to secure needed labor. This, of course, resulted in higher cost to the Bureau, and further resulted in the establishment of manpower regulations which gave priorities to the most important war contracts.

It was the Labor Relations Division's responsibility to obtain adequate manpower priorities, as well as to see that proper wages and working conditions were available on Bureau contracts, so that the most important projects would have no difficulty in securing adequate labor. Although the initial responsibility was the contractor's, in view of the complexities of the problems it was repeatedly necessary for the Labor Relations Division to assist the contractor in his problems which might face the various Navy officers in charge of construction, and maintaining necessary liaison with government agencies dealing in these problems.

In 1944, the manpower shortage became so serious that the Bureau's large emergency construction program for the West Coast was threatened. Therefore, the Bureau authorized the Superintending Civil Engineer to negotiate with the labor unions on the West Coast, in an effort to recruit labor throughout the country, transport it to the necessary projects on the West Coast, and guarantee transportation and subsistence both to and from the project if the recruit stayed for at least six months. An agreement was reached, which the Bureau submitted to the heads of the building trades unions for consideration and approval. This recruitment agreement became standard practice on all West Coast projects of most of the government agencies, and it was largely responsible for the adequate manning of numerous projects which had been competing with one another for the dwindling construction labor supply.

In carrying out these agreements, it was essential that the Labor Relations Division have authority to approve changes in wages and working conditions, as well as to instruct the officers in charge of construction as to the best manner of settling serious labor problems. The Division, therefore, became involved in reimbursement problems, as well as in acting as a liaison with other government agencies. As the Bureau was involved in both building construction and shipbuilding, it was necessary that different policies be established for these two types of construction. Although primary authority rested with the Bureau in the building construction field, the Bureau looked to the Bureau of Ships, the Navy representative in the Shipbuilding Stabilization Agreement, as the policy agency in the floating drydock and other ship construction contracts.

Early in 1943, the Bureau began to receive claims from employees and former employees of CPFF contractors, arising from alleged coverage of such employees under the Fair Labor Standards Act. These claims increased as a result of various interpretations by the Wage and Hour Administrator of the application of the act to construction projects previously considered exempt from the act.

In view of the conflicting opinions between the Department of Labor (Wage and Hour Administrator), on the one hand, and the War and Navy Departments, on the other, the Department of Justice, in December 1943, sponsored the so-called Inter-departmental Agreement, which provided for the defense of suits arising under the act against CPFF contractors, by the local United States Attorney. The agreement also prohibited raising certain defenses which had been ruled by the Assistant Attorney General to be improper.

All matters pertaining to suits and claims under the Fair Labor Standards Act affecting Bureau CPFF contracts were handled by the Labor Relations Division of the Bureau, in close liaison with the Office of General Counsel of the Navy Department. Representatives of the division made numerous trips to various parts of the country to investigate claims and suits, and assist contractors and

Naval Material Redistribution and Disposal Center, Torrance, Calif.

United States Attorneys in the preparation of defense of suits, and in the negotiation of settlements. In addition, the division maintained close liaison with other government agencies involved in similar suits and with the Department of Justice and the Labor Department, respecting coverage of claimants under the act.

The securing of manpower and materials for Bureau projects became more and more acute during the summer of 1945, and the division found it more and more difficult to obtain appropriate priorities for manpower for Bureau projects. In each case it was necessary that the project be brought before both the War Production Board and the War Manpower Commission, as well as the Office of the Secretary of the Navy and the Chief of Naval Operations, in an effort to determine the importance of the particular operation. In August, however, with the termination of hostilities with Japan, the manpower situation was immediately relieved, and shortly thereafter all manpower restrictions were released and the unions withdrew from the Building Trades Stabilization Agreement.

Although the Bureau had used its privilege of opposing unions before the Board of Review of the War Production Board for violation of the agreement in only one instance, it was felt that the agreement was one of the prime factors in maintaining satisfactory labor relations during the war effort.

Throughout the war period, the Bureau, through the Labor Relations Division, maintained cordial relations with representatives of the building trades unions, receiving considerable cooperation on manpower and other problems that arose on large Bureau contracts. Although jurisdictional disputes arose and strikes occurred on important Bureau projects, these were expeditiously settled, and lengthy strikes were averted.

Real Estate

Before July 20, 1942, the Bureau of Yards and Docks and the Office of the Judge Advocate General divided the responsibility for administration of Navy Department real estate. The latter office had cognizance of the legal features of real estate acquisition, leasing, and other functions until, by an executive order, in July 1942, these duties and functions were transferred to the Chief of the Bureau of Yards and Docks.

Whenever there was need for additional real estate for construction sites or for other naval purposes, the first requirement was to determine whether or not it would be in the government's interest to utilize other naval holdings. If other naval real estate was not available, consideration was given to the use of real estate of other government departments, the permanent transfer of which could be authorized by law. Thus, the Navy Department was able to utilize considerable War Department real estate under authority of Title 10, Section 1274, U.S. Code, which permitted "the interchange without compensation therefor of military stores, supplies and equipment of every character, including real estate" between the Army and the Navy. (Transfers of real estate between departments of the government later were allowed to be accomplished under authority of the Surplus Property Act, 1944.)

In those cases where other government real estate was not available for construction sites, it became necessary to acquire the use of privately owned lands (including lands of States, municipalities, etc.). It was the policy of the Navy Department not to acquire land in fee simple if a leasehold or other lesser interest were adequate for the purpose contemplated and the property could be acquired on satisfactory terms and conditions. Accordingly, much of the Bureau of Yards and Docks' construction work was on land occupied under lease, wherein title to all improvements, with the right of removal, was retained by the government. In many instances, owners, through patriotic motives, or otherwise, permitted the use of their real estate for such purposes without charge or for a nominal consideration.

Section 322 of the Economy Act of 1932 limited the amount that could be expended for the rental of private property to 15 percent of the fair market value of the property in those cases where the total annual rental exceeded $2,000. It also provided that the amount which could be expended for alterations, improvements, and repairs to rented premises could not exceed 25 per cent of the first year's rental. While the limitations of that section provided a much-needed safeguard in time of peace, the progress of events demonstrated that such restrictions were not appropriate to wartime conditions. During the early days of the war, important defense construction often was hampered, either because of the Navy Department's inability to negotiate leases on terms within the limitation of existing authority or because the cost of the necessary improvements to be erected on leased premises would be far in excess of the amount permitted by the Economy Act.

However, this situation was soon corrected by the passage of an act of Congress, approved April 28, 1942, which provided that the limitations of Section 322 of the Economy Act of 1932, as amended, "shall not apply during war or national emergency declared by Congress or by the President to such leases or renewals of existing leases of privately or publicly owned property as are certified by the Secretary of War or the Secretary of the Navy, or by such person or persons as he may designate, as covering premises for military, naval or civilian purposes necessary for the prosecution of the war or vital in the national emergency."

The enactment of this statute enabled the Navy Department to provide all necessary and adequate improvements on leased premises and to proceed promptly with construction work, in the same manner as if the land were owned by the government.

Under peacetime restrictions of law, no public money could be expended on land acquired for the purpose of erecting a public building "of any kind whatever" until the Attorney General had approved the title of the real estate. When a declaration of taking was filed in the condemnation proceeding, title immediately vested in the United States. However, even this procedure was not sufficient to meet the requirements of wartime construction, because the declaration-of-taking statue did not permit immediate entry and possession without a court order.

This situation was met by the enactment of the Second War Powers Act, 1942, Title II of which permitted the Secretary of War, the Secretary of the Navy, and other department heads authorized by the President, to take immediate possession of

real property upon the filing of a condemnation petition and to use and improve the property (as well as property acquired by purchase, donation, or other means of transfer) prior to approval of title by the Attorney General.

After its enactment, the authority of the Second War Powers Act was invoked in practically all instances where lands were condemned for naval uses -- either permanent or temporary. Where permanent need of an authorized naval facility was foreseen, the land was usually condemned. However, in those cases where the taking was strictly for a war purpose, the land was obtained for a year or for a specified number of years, with the right of renewal. In most instances, this resulted in a negotiated lease or in a stipulation between the parties on terms satisfactory to the government. In all such instances, however, the essential construction work went forward without delay, under authority of the Second War Powers Act.

During the period of the emergency, land acquisitions involved about 1,080,000 acres of land in 27,000 tracts. The total cost of this land acquisition program exceeded $200,000,000. Of the acquisitions, 20,000 were concluded by negotiation involving personal contact between Bureau of Yards and Docks, field representatives and the owners.

The Bureau entered into approximately 4,000 leases a year, averaging a total annual rental of $20,000,000. During the same period, almost 5,000 permits were issued to various individuals, licensing them to perform activities on Navy-controlled property. These activities included railroad operations, easements, construction of sewer and electric lines, and grazing of cattle.

During the war, the Real Estate Division entered into more than 4,300 leases, with a total annual rental of more than $16,500,000. All these leases provided for government restoration of the property to its former condition upon the expiration of government use. Accordingly, when, shortly after V-J Day, many of the naval activities on leased properties were decommissioned, the Bureau, by December 1945, found itself in the midst of a huge disposal program. This program gained great momentum by May of 1946 when roll-up schedules of all airfields had been prepared and the Real Estate Division was transferring the airfields to the War Assets Administration for disposal pursuant to the provisions of the Surplus Property Act of 1944. Similarly, roll-up schedules for hospitals, training camps, ordnance stations, personnel separation centers, and other naval activities were prepared.

Concurrently, the Real Estate Division was actively engaged in declaring surplus those naval activities which were established on lands acquired in fee simple. During the war, the Bureau acquired title to more than a million acres of land in more than 25,000 separate tracts, for which it paid more than $164,000,000. Final determination of the value of several thousand of these tracts was still in court in June 1946, although a partial payment had been made. Many of these lands became surplus to the needs of the Navy Department, and the Bureau was actively engaged at that time in declaring these properties to the War Assets Administration for disposal pursuant to the Surplus Property Act of 1944.

100-Octane Gasoline Program

By Navy Regulations, the Bureau of Yards and Docks is charged with the responsibility for the design and the construction of all parts of the naval shore establishment that have to do with the storage and handling of liquid fuels, such as tank farms, pipe lines, pumping plants, terminals, waterfront structures, and all other corollary facilities.

During the war period, the Bureau undertook certain special assignments in connection with liquid-fuel programs by special direction of the Secretary of the Navy, as follows:

(a) The Chief of the Bureau acted as chairman of a special committee convened by the Director of War Mobilization to assist the Petroleum Administration for War (PAW) in expediting the construction of new 100-octane aviation gasoline plants throughout the United States and in various foreign countries, and in improving and expediting production of such fuel. The Bureau's entire departmental and field organizations were made available for such assistance as was necessary, and 15 officers of the CEC were detailed for specific full-time duty.

(b) The Bureau undertook the preliminary reconnaissance survey and exploratory survey of Point Barrow in Naval Petroleum Reserve No. 4, in Alaska.

One of the many important materials required to wage war successfully was 100-octane aviation gasoline. The use of high-octane gasoline, which greatly increased the power obtained from airplane engines,

Interior of Electrical Ship, Terminal Island (Calif.) Naval Drydocks

was, to a certain extent, developed during the war. From the beginning the need for immense quantities was evident and became increasingly urgent.

On November 25, 1943, a committee, called the "100-Octane Gasoline Committee," with representatives of the various interested agencies, was formed to expedite the construction of facilities for the production of this gasoline. The committee was headed by the Chief of the Bureau of Yards and Docks as chairman and had representatives from the Petroleum Administration for War, War Production Board, War Manpower Commission, War Department, and Defense Plants Corporation.

By the early part of January, the Chief of the Bureau of Yards and Docks, in a memorandum to the Secretary of the Navy, stated that construction of new plants was underway and the improvement of existing plants was being made as rapidly as possible. At this time, he also foresaw that there would be manpower shortages.

The importance of the project was indicated in a directive, dated January 31, 1944, which stated that the program had equal priority with the landing-craft program. These two programs were topped only by Operation MANHATTAN, the atomic bomb project.

At the direction of the committee one Navy and one Army officer set up an organization of approximately fifty Army and Navy officers with petroleum production experience to expedite in every way possible the construction and improvement of plants. Districts were established with officers assigned to each plant under construction. Superintending Civil Engineers and Army District Engineers were called upon frequently to aid in expediting the construction. As a result of these efforts, the Secretary of the Navy was able to announce at the end of April that the Allied Nations were producing more than 400,000 barrels of 100-octane gasoline a day, which was approximately ten times the pre-war production of the United States.

In April of 1944, the Chief of the Bureau of Yards and Docks reported to the Secretary of the Navy that plans were being made to explore the Navy Petroleum Reserve No. 4 at Point Barrow,

Hangar Used for Ships and Offices, Advance Base Depot, Tacoma, Wash.

Alaska; in June, the 1058th Construction Battalion Detachment departed to make reconnaissance surveys.

By July 1944, earlier production facility goals were about reached, but in the meantime the changes in war had increased the needs.

As construction was completed, the need for the committee diminished, and for a time, late in 1944, it was all but disbanded. Early in 1945, however, the Joint Chiefs of Staff reported an increase in demands by the air forces. This time the committee not only aided in constructing the plants but also in the operation of those previously completed. V-E Day in May 1945 saw the end of the emergency, but a change in requirements to even higher quality octane greatly increased the demands. This change in octane quality just about cut the producing capacity in half, but at the same time the quantity requirements remained the same; thus the committee had to redouble its efforts. V-J Day saw the situation well in hand. Shortly thereafter the committee was dissolved.

As a result of the committee's activities, the construction completion time of new facilities was reduced by as much as 25 percent. It also broke the bottleneck in equipment fabrication, improved labor relations, and met every requirement of the Joint Chiefs of Staff.

Land and Claims Commission, Guam

The Bureau had an active part in the work of the Land and Claims Commission on Guam. About 3,000 claims, aggregating about $8,000,000, involving land, buildings, animals, trees, and money, were received by the commission, operating on Guam. The establishment of ownership of property was difficult, due to destruction of records, and the inadequacy of the records even if complete.

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Footnotes

1. Public No. 43; H.R. 4278, 76th Congress.

2. Bureau Circular Letter 10-42, 20 Jan. 1942.