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Decentralization required us to have more space to take care of the files that we were shipping out to the district offices the personnel required.

The CHAIRMAN. For example, take the Chicago office, where you are paying an extravagant rent. Why could you not go out from the center of the city and rent space in less expensive quarters than you occupy there? Col. FORBES. We are paying $2.87 per square foot there.

The CHAIRMAN. You can rent space for much less than that if you go outside of the Loop.

Col. FORBES. We make it a practice not to pay more than $1 per square foot, but in the larger cities we are having a great deal of difficulty. We are having difficulty in New York, Chicago, and Boston, but we are getting the rents down and are cancelling contracts just as fast as we can find locations. We have changed the Philadelphia situation, and get space there for less than $1 per square foot.

The CHAIRMAN. You have reduced the rent in Philadelphia ?
Col. FORBES. Yes, sir.

The CHAIRMAN. It would not seem to me that it would make any difference whether you were 3 miles away from the business center or in the business center, so far as your business is concerned, because you do not have to hunt for business.

Col. FORBES. I wonder if you understand how the Veterans' Bureau is sought after by local and State organizations, individuals, and Members of Congress when we start to make a change in our locations.

The CHAIRMAN. I do not pretend to understand that.

Col. FORBES. That is exactly what is done. We try to hold the rents down.

The CHAIRMAN. I would not care what any Member of Congress urged, but if I were in your place, when I came to the expenditure of public money, I would spend it to the advantage of the Treasury and the taxpayers. We are supposed to be here representing the taxpayers, and let us visualize that for a minute: We are spending money that is paid in part by the street sweeper. He may not pay it in direct taxation, but he pays it in the cost of living. The money is contributed by men who dig sewers, who lay brick, by men who follow the plow and work on the farm from before sunrise until after sunset. We are spending, for example, the money of the man who has five or six children, and who loses every rainy hour of every rainy day during all of his existence. Then when he gets to be 45 years of age, he has passed the peak of his earning power, and if he is employed at all he is employed at an ever-lowering scale of wages from that time on.

He may have five or six or seven or eight children, but there is no chance in the world for him to get on anybody's pension roll. He is done for when his powers of physical endurance cease. However, he is raising a family and paying the high cost of living. We are doing a work of love for those men who gave themselves to the country, and we are proud to be able to do it. There is nobody any more enthusiastic about doing it than I am, and I do not believe that there is any man living—I do not care who he is, whether a Senator or a Member of the House or whether he is President of the United

semploat time of five or Sfor him

States—I do not believe that any man has any right, under any conditions or circumstances, to dissipate 5 cents of the money that we are appropriating for any purpose except the direct purpose for which the money is appropriated. I would take any chances on that, and I would quit any job, I do not care how powerful or influential it might be, if, in order to hold it, I had to do things that you say you are forced to do.

Col. FORBES. I am not forced to do it, and I take exception with you there.

The CHAIRMAN. You said that.
Col. FORBES. I said that the influence was brought to bear.
The CHAIRMAN. That is being forced, is it not?
Col. FORBES. It is not being forced, because I will not be forced.

The CHAIRMAN. Then, of course, if you are not being forced you ought not to make that statement, charging Members of Congress-

Col. FORBES (interposing). I did not charge Members of Congress with deliberately coming down and sandbagging me, but I say that Members of Congress have no hesitancy in coming to me about matters having to do with rentals or anything else pertaining to the duties of the bureau as well as much outside influence brought to bear. I simply brought this to your attention so you could appreciate our position.

The CHAIRMAN. After all, you say that they do not force you. You are not being forced, and, of course, the responsibility is directly upon you. As long as you are not influenced by what they say, you must bear the responsibility for any excessive costs. Now, we have got to think about these things, and we have got to think about the class of people that I have just tried to describe. We have to direct our work upon the basis of their hopes, their fears, their ambitions, and their disappointments. Let us think about them. They do not go on anybody's pension roll, and they are patriotic people.

They are bringing up families, and those families will have to assume the responsibilities and obligations of citizenship. In the meantime they are struggling for existence. Sometimes I have seen them without anything but a kerosene lamp to warm the little quarters in which they are housed. We are living in palatial quarters here, but we should never cease to think about them. Let us forget these luxuries that we are enjoying and think about them. Let us spend this money according to the standards that we would gauge it by if we had to make the sacrifices that they are making. I do not know that there is anything further I want to say, but that is my feeling about it.

Col. FORBES. I appreciate very keenly, Mr. Chairman, the exact conditions you have so ably recited. I know the pinch of hardships and have passed through deprivations myself. One of the greatest rewards to be derived from the work of the Veterans' Bureau is that it bestows benefits to just such a worthy class of people as you have indicated. I pledge you that I will do all within my power to sa feguard the taxpayers of this Republic by not spending a penny other than is absolutely necessary.

The CHAIRMAN. We realize that the law is wide open; but at the same time the thing to do is not to spend a dollar for anybody or anything that you can get for 50 cents.

THURSDAY, FEBRUARY 16, 1922. UNITED STATES SHIPPING BOARD AND EMERGENCY

FLEET CORPORATION.

STATEMENTS OF MR. A. J. FREY, VICE PRESIDENT IN CHARGE OF OPERATIONS, AND COMMANDER R. D. GATEWOOD, DIRECTOR OF CONSTRUCTION AND REPAIRS.

ADDITIONAL APPROPRIATION NEEDED FOR COMPLETION OF VESSELS.

The CHAIRMAN. I wish you would sit down and give us the details of the estimate for $12,000,000 and explain why you think this request is justified. Do it in your own way for the time being, and we will let you run along until we think you have stepped over the line of reason, and then we will commence to ask you questions.

Commander GATEWOOD. I have a written statement here which I tried to boil down and make as short as I possibly could, in order to save the committee's time. I will just read this statement, and I think it will explain the situation.

The estimate of $69,000,000 to complete construction from April 1 last, which was given to the Appropriations Committee in the hearings dated April 10, 1921, was confined solely to contemplated expenditures of the construction division only and did not cover any expenditures from construction funds to be made from any other source than this division.

The CHAIRMAN. Suppose you explain that. I can not get the $69,000,000 through my head. I do not quite understand that. Let me tell you what I understood, before breaking the promise I.made that we would not interrupt you. My understanding is that you had 19 ships in course of construction; that $29,000,000 would be required, according to your estimates made at that time, to complete those ships; that $25,000,000 of that $29,000,000 has been appropriated, and I think we expressed the hope then that, on account of the lowering prices of labor and material—and I think you joined us in the expression of that hope—you would not have to come back for the $4,000,000, but that $25,000,000 would complete the job. Now, you are coming back for $12,000,000, notwithstanding the lower prices of labor and material since the $25,000,000 was appropriated.

Commander GATEWOOD. That is an absolutely correct understand

ing.

The CHAIRMAN. Then I do not quite understand your reference to an estimate of $69,000,000.

Commander GATEWOOD. I am going back to April 1, 1921, and not to the July hearings. I am going back to the original estimates. That estimate was composed of construction division expenditures only and did not relate to anything else.

The deficit of $12,000,000 is partly apparent and partly real, for the following reason: In our original estimate of $69,000,000 we included certain credits-or the April 1 estimate of $69,000,000 was made up on the assumption that there would be available in cash through refunds and payments by contractors the sum of approximately $7,000,000. The original estimate of these credits as given by the districts total about $11,000,000, but the figures were arbitrarily cut to $7,000,000 in submitting the estimates, as this was considered more nearly a proper estimate of the probable actual cash recovery. Our total estimate to complete was therefore reduced by this $7,000,000 credit item. The law prohibits us from having those credits turned back for the payment of construction bills.

The CHAIRMAN. After June 30 next.

Commander GATEWOOD. The act of March 4, 1921, prohibits us from taking these construction credits and using them for construction funds, and we did not know about that at the time of the April hearings. It also developed that the financial condition of some of the contractors will make cash recoveries very uncertain.

In making the estimate as of October 1 it now appears extremely doubtful if any cash recovery will be available for construction purposes, for the reason that the major portion of any credits that may be received will fall within the provisions of the congressional act of March 4, 1921, which prohibits the use of certain moneys for construction purposes. It alsó develops that the financial condition of some of the contractors will make a cash recovery, even though it could be used for construction purposes, very uncertain, and if it were recovered it would be at such a late date as not to make it available for use in paying bills for the construction program. Therefore, in making up the October 1 estimate it seems imperative to include the $7,000,000 credit item as being now not available.

The CHAIRMAN. What do you mean by construction credits? Does that mean that you do construction work for some other people!

Commander GATEWOOD. I have a note here in regard to some of the credits in the settlement of construction contracts. This note shows the nature of the credits:

1. Under the adjustment contract with submarine boat, it was estimated that the Emergency Fleet Corporation would obtain a cash refund of two or three million dollars through the sale of material, plant, rentals, etc.

2. Under the adjustment contract with the Terry Shipbuilding Co., it was estimated that the Fleet Corporation would receive through the sale of ships approximately $5,625,000, which we could use for construction purposes. This is really an adjustment of a ship contract whereby after certain allowances had been made for cancellation, etc., vessels under construction were sold to the Terry Co.

3. The balance of the credits consisted of overadvances and overpayments to contractors, wood-ship contractors, etc., which we thought on April 1 would be available.

Some of this will be recovered, but how much we can not foresee. The amount of those credits was originally estimated at $11,000,000, but, as I have said, that estimate was reduced to $7,000,000.

Item of $8,600,000 expenditures charged against construction from other departments.--This item consists of the payment of the overhead and administrative expenses of other departments, and also for the payment of cancellation claims (until August) and other miscellaneous items other than actual ship construction from construction funds. As the construction division estimates were based on expenditures for this division alone, we, of course, did not take into consideration, in making up the April 1 estimate, any expenditures from construction from construction funds. As the construction division estimates have any means or knowledge of estimating any other expenditures. The items making up this total are apparently properly chargeable to construction, and should have been added to the estimates of this department by the former comptroller's department in submitting the estimates, and because this was not done there is now a deficit in the total funds needed to complete construction.

The present estimate, from which the $12,000,000 deficit is arrived at, is built up as follows: Estimate to complete by construction division..

$34, 990,000 Overhead of other departments ---

5, 757, 827

Total
Cash on hand --

40, 747, 827 17,000,000

Total -
Navy payments, approximately-

23, 747, 827 10. 400.000

Total ----
Less overhead material sales section------

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cCull.

Net amount needed.

-------- 12, 047, 827 NOTE.-The above estimate of $34,990,000 corresponds to an increase of about $4,000,000 over the estimate submitted as of April 1, and this discrepancy is again due to the lack of accurate figures obtainable in the comptroller's department as to the difference between vouchers passed by this division and vouchers actually paid by the comptroller's department at the time of making the April 1 estimate.

The CHAIRMAN. What I do not get through my head is what this has to do with the building program or the completion of the 19 ships. I think it was the definite understanding of every member of this committee that you had a program for building that would cost $29,000,000. · Commander GATEWOOD. Yes, sir; but in which we allowed for a credit of $7,000,000 that we will not get.

The CHAIRMAN. There was nothing said to us about that, so far as I recall.

Mr. Byrns. I do not recall it, and I do not understand just what you mean by saying that you will not get it, unless you have in mind that it will not be collected

Commander GATEWOOD. That is just about the size of it.

Mr. Byrns. The act to which you referred covered all receipts into the Treasury except from operations from June 30 of last year, as I understand it, and the general appropriation act for this year provided that $55,000,000 might be used for various purposes.

Commander GATEWOOD. We had $25,000,000 of that expressly for construction. Our estimate of $29,000,000 that Mr. Madden asked an explanation of was based upon obtaining certain credits which we are not now going to get. If they are collected, under the present provision of law, they will not be available for paying our present construction bills. Whatever is collected the Government will get, but it will not come back as a credit to the construction fund as such credits formerly did prior to the act of March 4, 1921.

Mr. Byrns. That will delay the completion of the ships?

Commander GATEWOOD. It will delay the payment for them if they have to wait to get these funds in. · Mr. Byens. But it would not delay the delivery of the ships?

Commander GATEWOOD. The ships are practically completed. There are only two more to complete, and one of them will be delivered in 10 days and the other in two months. A very large proportion of this money is to be used on ships that have already been completed. It will be used in the settlement of the contracts. In the

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