consideration. When these compressors are available they, together with the fourth compressor of identical design now temporarily in use by the terminal construction division at the Cristobal coal plant, should be installed, one at each of the roundhouses and one each at the Cristobal Dry Dock shops and Balboa shops, in order to provide air at the least possible cost for work at irregular hours.

The buildings of Paraiso shops are of temporary character, and a considerable portion of the work is necessarily performed in the open. The organization in effect at the Paraiso shops at the close of the last fiscal year was continued. Mr. James Macfarlane, superintendent of dredging, exercised general supervision over the shops in addition to his dredging division duties, one-half of his pay being charged to the mechanical division for this service.

The number of men employed, the pay roll, and other details of similar nature relating to these shops, are shown by tables attached. Cristobal roundhouse.-The Cristobal roundhouse continued in operation during the year, most of the time under the supervision of Mr. J. M. Abston, roundhouse foreman. The amount of work performed decreased considerably, and some minor changes in the equipment. were made, but nothing of material consequence, except the tearing down of the old coal-chute building, which was in need of considerable repairs, and its operation was found to involve greater cost for coaling engines than would result from handling the coal by shovels; also the large toilet building, which had deteriorated very badly, was torn down and replaced by a toilet building of smaller size suitable for the reduced force in employ in the district.

By means of the interconnecting pipe line between the roundhouse and the dry dock it has been possible to supply air to both plants from a single compressor plant, this resulting in material economy. When the work on Pier 7 at Cristobal has been completed, it is anticipated that the air-compressor plant at this roundhouse will be placed out of use entirely except at night, when there is no night work under way at the dry-dock shops and when one of the small compressors mentioned above as previously in use by the McClinticMarshall Construction Co. becomes available it is proposed to install it for carrying this night load, and the most efficient arrangement possible will then have been provided.

Hostling. The small hostling establishment at Empire was discontinued September 30, 1914, but later, on account of inability to find quarters elsewhere for the employees occupying houses at Culebra, this establishment was reestablished at Culebra and continued until April 11, 1915, when it was permanently discontinued.

The small hostling establishment at Paraiso was continued until February 19, 1915, when changes in passenger transportation made it possible to hostle engines for the Balboa-Paraiso labor-train service at Balboa.

The small hostling establishment at Gatun was discontinued February 19, 1915, but subsequent to that time, until after the close of the fiscal year, a small force has been in employ from time to time at that point to prepare the equipment stored on the west side of the canal for emergency use on the Gatun Dam and to lay the same up in condition for immediate service if required; also to make running repairs on same while placing additional earth fill west of the spillway on the dam during March and April, 1915.

On June 15, 1915, it became necessary to hostle an engine at Gamboa in connection with Chagres River sand service, and a colored hostler was detailed to look after this engine under the immediate supervision of the engineer. This arrangement was still in force at the expiration of the fiscal year.

The

Car-inspection service. The car-inspection service at Mount Hope continued, under the supervision of Assistant Foreman William Markham, under the general supervision of the general foreman of the car department at Balboa. On March 29, 1915, due to the impossibility of taking care of the special rush of work on cars, it was deemed necessary to reopen the old Cristobal car shops temporarily for making repairs to box cars and Rodger ballast cars which had been allowed to deteriorate to a great extent due to uncertainty as to the amount of equipment of this kind which would be required under operating conditions. The tools supplied consisted only of a cut-off saw, a jointer, and a saw table, which were temporarily installed, practically all of the material being cut to size at Balboa and shipped down ready for use. amount of work in the Balboa car shops incident to repairing cars sold to the Chicago House Wrecking Co. and to the Alaskan Engineering Commission, together with work on dump cars and steel flats (delayed to the greatest possible extent on account of uncertainty as to necessity for it) so crowded the Balboa car shop as to make it impossible for that shop to care for the box car and Rodger ballast car work. It is anticipated that the performance of this work at Cristobal may be discontinued July 24, 1915, and that subsequent to that date all car work may be taken care of in the Balboa shops. The supervision of this car work at Cristobal was placed under Assistant Foreman Markham, in addition to his general inspection duties, and has been efficiently performed by him.

Floating derricks.—The Ajax, the first of the two floating derricks contracted for in Germany, arrived on the Isthmus July 9, 1914, and the second, the Hercules, arrived July 23, 1914. The jibs for these derricks were assembled on the east shore of the lower lock at Gatun, and were placed on board the pontoons while the latter were afloat in the lock. The tests of the Ajax were undertaken, but prior to their completion the necessity for removing the remnants of the exploded drill barge Teredo in the Cut resulted in her being taken there for the performance of this work. On December 7, 1914, while the tests were under way, the jib collapsed entirely and after the contractors had been directed to strengthen up the jib of the Hercules, the tests on that derrick were proceeded with. She was finally accepted March 30, 1915, and turned over to the mechanical division for operation in connection with a general wrecking service including these two derricks and the railroad wrecking equipment. The Hercules is now stationed at Paraiso so as to be handy for work on dredging equipment which constitutes the greater portion of the work required of it. The material for the new jib of the Ajax is now being erected and upon completion and acceptance this derrick will be stationed somewhere north of the Cut. In general, the operation of the Hercules has been satisfactory, and, although the cost of maintenance of these two derricks will be very high, they are valuable equipment for canal purposes, especially in the event that a vessel should be sunk in the Cut or in any of the locks, or in the event that it should be necessary to lift the lock gates for

any purpose. The pontoons for these floating derricks were docked in the upper west lock at Gatun November 9, 1914, to permit cleaning and painting the underwater bottom.

Fuel-oil handling plants.-Your orders directed that upon completion of the fuel-oil handling plants at Balboa and Mount Hope they be placed in service by this division and that when in efficient operating condition they be transferred to the supply department. The Balboa plant was placed in condition for service on January 12, 1915, but did not handle all of the fuel oil until January 28, 1915. In the meantime the Union Oil Co. was permitted to operate its pumping plant to supplement the canal plant. The Mount Hope plant was first operated February 25, 1915, and began to accomplish the complete service at that end of the canal on March 8, 1915. Data as to the amounts of oil handled are contained in the tables attached. The plants were accepted as complete (with minor exceptions) on July 1, 1915, and it is anticipated that they will be in condition for transfer to the supply department as contemplated by your orders about September 1.

The stocks of oil belonging to The Panama Canal have been distributed almost exclusively for canal purposes, the sale price being in excess of what shipping companies could obtain oil for from private corporations. So far, oil has been delivered for private corporations only for the Union Oil Co. and the Panama Agencies Co. All oil, whether for The Panama Canal or for private companies, must be handled by the Panama Canal plants and must be delivered to vessels or elsewhere through the Panama Canal pipe lines. The prices fixed for the sale of Panama Canal oil to individuals and companies is for the purpose of regulating prices rather than of obtaining business for The Panama Canal. A suitable price is charged the private companies for pumping their oil and for the use of the plant and pipe lines. So far, it has been possible to handle all oil deliveries with a single shift at the plant, supplemented by employees temporarily detailed from the mechanical division shops. This procedure has resulted in considerable saving, and until deliveries are materially in excess of those at present the practice should be continued.

General. The expenditures and the number of employees in the various establishments of the division and the division as a whole. are given in the tables attached.

The maximum expenditures for the division as a whole were for the month of March, 1915, and amounted to $460,095.46, divided as follows:

Roundhouse, Cristobal.

$223, 368. 30

42, 119. 74

44, 950. 79

14, 021.95

Fuel-oil plants (including $133,200.68 for value of oil handled) 135, 634. 68

The maximum number of employees in the division was in July, 1914-972 on the gold roll and 2,337 on the silver roll, distributed as follows:

The minimum expenditures for the division as a whole were for the month of February, 1915, amounting to $309,073.97, distributed as follows:

The minimum number of employees was during the month of December, 1914-783 on the gold roll and 1,626 on the silver roll, distributed as follows:

The present prospects are that the force now employed is the maximum likely to occur; and if control is obtained over the slides in the Cut, this number will be materially reduced in the near future.

One of the great difficulties experienced during the year has grown out of the lack of hotel accommodations near the shops and to lack of quarters readily available. The temporary office building at the Balboa shops, when it was vacated, was fitted up for lunch-room purposes, and this action and the completion of additional quarters at Balboa greatly improved conditions at the Balboa shops; but it was still necessary to provide labor-train service, which constituted a considerable item of cost in the shop overhead. Lack of quarters near the other shops made it necessary to run labor trains to serve them, and its cost constituted a material percentage of the overhead of those shops. With the abandonment of Corozal and the removal of employees quartered there into the new quarters under construction at Balboa, and with the abandonment of the Paraiso shops, these adverse conditions will gradually be reduced to the minimum.

The accounting system established for the division has been operated throughout the year and has proven of marked value in permitting the cost to be analyzed and greater efficiency to be obtained. Some minor modifications have seemed desirable from time to time and, after proper consideration, have been made with the approval of the auditor. As a whole, the system has proven itself well adapted for the purpose.

The cessation of work which could be computed on a cost-per-unit basis has made it still more apparent that the cost of supervision of canal employees must be higher than was the case during the construction period. By placing the operators of the equipment producing it on a competitive basis work of this character constitutes those operators, to a considerable extent, supervisors of the repair work necessary for such equipment and permits corresponding reduction in supervisory force in the shops proper. Under present conditions this work is practically all completed. The work in hand is sufficient to justify the expectation that only moderate discharges will be necessary in the immediate future; but before the close of this fiscal year it will be necessary to lay off a large number of men, and this fact is well known to the employees themselves. This

constitutes a most unsatisfactory condition for the efficiency of shop management, since there are always a considerable number of men in an establishment as large as the mechanical division who will render efficient service with moderate supervision only when there is probability of long continuance in service. Even under the best supervision when the amount of work performed each day admittedly shortens the length of time which must elapse before discharges are made it is difficult to obtain really efficient results. These conditions, especially during the first quarter of the last fiscal year, materially affected the efficiency of the division, but reductions in force necessary at that time permitted weeding out the less efficient employees, with the result that when the present rush of work began the force as a whole was rather above the average efficiency to be expected in organizations of like character. The foremen, as a general rule, have been efficient in their duties, and it was only by their conscientious devotion to their duty that the efficiency has been as high as it is.

The efficiency of the division as a whole has also been affected adversely by the amount of overtime work required. The distance of the Isthmus from labor markets and the impossibility of foreseeing exactly what demands would be made on the shops, especially demands for work on dredging division equipment in service in the Cut, has made it impossible to foresee the needs for increases sufficiently far in advance to permit the men to be obtained from the States at the best time. Ordinarily, at least two weeks are necessary, even when cable requisition is made, for the first man to report after employment in the States, and requisitions are rarely fully filled in less than six to eight weeks. The character of the work, as well as its quantity, was so uncertain that the force available (in spite of the fact that practically every applicant on the Isthmus was employed for such work as he could do) was generally, throughout the last six months, less than required, and urgent work on floating equipment required much overtime work. This condition was rendered more acute by the operation of the leave regulations, comment relative to which will be made under subsequent paragraphs.

Overtime work in this climate is, in my opinion, inconsistent with the best interests of both the employee and the employer. In spite of the possibility of greatly increasing the income of individual employees by overtime work, many of them properly object to being detailed for overtime work. The necessity which has existed for a considerable portion of the year that large amounts of overtime work be done created dissatisfaction on the part of employees, which has found expression in numerous reports and protests by shop committees as well as by individual men. Since the mechanical division employs the majority of the mechanics on the Isthmus, and probably half of the total number of citizens of the United States on hourly pay on The Panama Canal, and inasmuch as the mechanic trades are those most likely to be associated in unions, a large percentage of these protests and complaints have come from employees of this division. Investigations and reports in connection therewith have taken much of the time of the superintendent, assistant superintendent, and general foremen, in addition to the time required of the Governor and Acting Governor in the same connection. The question of work to be assigned to aliens (generally colored West Indians)