operators to take the place of the men of the Signal Corps. Even had American operators been procurable the expense would have been beyond our means. In view of these conditions, and also its general policy in that regard, the insular government, contemporaneously with the organization of the telegraph division, through the bureau of education, organized schools of telegraphy at Manila, Iloilo, Vigan, and San Isidro for the training of native operators. These schools have done and are doing satisfactory work, and from them 18 natives have already graduated and are now on duty in the telegraph division. This number will be steadily and rapidly increased, as the schools are largely attended. At the same time that the students are being instructed in telegraphy they are also being taught the English language. The natives take readily to work of this character, and it is believed from this source of supply will be drawn in the not remote future an adequate supply of telegraph operators at moderate cost, who, under the direction of skilled American inspectors and chiefs of division, will be able to give a satisfactory service.

CIVIL SUPPLY STORE.

The bureau of constabulary has also imposed upon it the duty of running a supply store, through which is furnished not only the constabulary forces, but also all civil employees of the government outside the city of Manila. This is rendered necessary by reason of the inability of American provincial officers, school-teachers, and other civil servants in the provinces to obtain such food as they had been accustomed to and which is essential to their health and comfort. While there is no natural relation between this service and the legitimate duties of the constabulary it was deemed advisable to place it in this bureau for economic reasons. The constabulary bureau had already organized and in operation a commissary for the supply of its own men, and the addition of the duty of furnishing supplies to other government officials involved a comparatively small increase of labor and expense upon the constabulary supply division.

BUREAU OF COAST GUARD AND TRANSPORTATION.

This bureau, created by Act No. 266, has under its control lighthouse maintenance and construction, and is also charged with the duty of operating a fleet of small government vessels called coast guard cutters, 17 in number. These vessels are used in transporting insular, provincial, and municipal officials and employees, government supplies, carrying the mails, and preventing smuggling. The bureau has also under its control, in so far as relates to the selection of officers and crew, the furnishing of supplies and keeping in repair a number of small seagoing launches, used by the constabulary and provincial officials in the performance of their duty.

One of the principal difficulties with which the Commission has had to contend has been the lack of means of speedy and cheap communication between the various towns and islands of the Archipelago. Internal communication in the larger islands is slow and difficult because of lack of railroads and highways, and between the islands because of irregularity and uncertainty in the movements of merchant vessels. The great mass of the population at present is found along the coast

line, the interior of the islands being as a rule sparsely populated. This is not due to any lack of fertility in the soil of the interior, or in its lack of suitability for cultivation and habitation, but solely to the difficulties of transportation and intercommunication; nor will there be any substantial change in this regard until the larger islands are opened up through the medium of railroads. The Commission, therefore, appreciating the importance and, indeed, the absolute necessity of having some means of easy and reliable communication with all coast points in the islands, determined to purchase a sufficient number of small vessels for that purpose.

The bureau was organized immediately after the passage of the act with Commander (now Captain) A. Marix, U. S. Navy, in charge.

After careful study of the requirements of the situation, both as to the number and character of the vessels needed, it was determined to purchase 10 single-screw composite vessels having a length of 148 feet; beam, 28 feet; maximum draft, 9 feet; minimum draft, 8 feet; displacement, 400 tons; deck house for the accommodation of 12 passengers, to be of hard wood; hull to be of teak wood sheathed with copper, and an economical speed of 10 knots; and 5 vessels having twin screws; length, 138 feet; beam, 24 feet; maximum draft, 8 feet; minimum draft, 7 feet. They were all to have steel frames, teak hulls, and copper sheathing, with accommodations for passengers. Each of these vessels was to have a freight-carrying capacity of about 150 tons, and to be able to keep the sea in any weather.

After soliciting bids in the United States, Japan, and China, contracts were let for the 10 first-named single-screw vessels to Farnham, Boyd & Co., shipbuilders, Shanghai, they being the lowest and best bidders; and for the five twin-screw vessels contracts were let to the Uraga Dock Company, near Yokohama, Japan.

The Commission would have much preferred to give these contracts to American shipbuilders, but the only bid received from that quarter was about twice as high as from Farnham, Boyd & Co. and the Uraga Dock Company, a difference so great as to impel the Commission, notwithstanding its preference for American shipbuilders, to let the contracts as stated.

Farnham, Boyd & Co. delivered the vessels which they had agreed to build in due course. They were on the whole very satisfactory, being built upon an admirable model, were very substantial, and considerably faster than the contract required. We were not so fortunate with the Uraga Dock Company. Although highly recommended as competent and reliable shipbuilders, events did not justify their repu

tation.

The insular government selected an inspector of reputed capacity and integrity to be on hand during the construction of the vessels to see that they came up in every particular to contract requirements, which were specific and rigid. He, however, proved to be either incompetent or faithless, and, indeed, both. He was induced by the company to accept as up to contract requirements two of the vessels which were first completed. When they arrived in Manila it was found that their model was not good; that the vessels trimmed badly, being down by the head, and as a result were unable to make the contract speed in anything like a heavy sea; and also drew too much water. There were other minor defects which need not be enumerated. The other three vessels were still in course of construction. Pursuant to the con

tract partial payments had been made at certain stages of completion of the vessels on the certificate of the inspector. When the defects above referred to were discovered there had been paid on the five vessels an aggregate sum of $214,789.79. We held, however, as a guarantee of faithful performance the check of the company for $31,000. The inspector who was thus derelict was discharged and a competent man put in his place. Investigation showed that the three vessels which were in the course of construction, by reason of the faultiness of their model and other defects, would not come up to contract requirements, nor would they meet the purpose for which they were especially designed, although they would have doubtless proven fairly good vessels with some minor changes and modifications.

In view of all this the Uraga Dock Company was notified that the three remaining vessels would not be accepted nor would we pay any further sums of money until they were delivered in Manila for trial and shown to be up to contract, and that unless this was agreed to we should insist on canceling the contract. The company sent one of its chief officials to Manila for conference. He claimed that the most vital of the defects complained of were due to changes made in the original plans by verbal direction of Captain Marix and our inspector, and consequently that they were not to blame in the premises. We became satisfied that the vessels could not be made to fully answer our purpose, and for reasons which need not be here further detailed and enumerated, we were indisposed to continue the contract. Finally, after considerable negotiation, as litigation in Japan, under all the circumstances, seemed unprofitable and dubious, it was decided that it was in the public interest to make a final settlement of the matter, which was done by agreeing that the insular government should be released from obligation to take the three remaining vessels, then tially completed, the company to surrender to us the certified check for $31,000, which was held by the insular treasurer, and to retain all moneys which had been paid.

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The net result of this transaction was the loss of about $30,000 to the insular government, but it was believed, all things considered, better to pocket this loss rather than continue the contract. One of the main inducements to this course was the urgent need which we had for suitable vessels and the consequent importance of placing an order for them elsewhere.

Accordingly the insular government placed another contract with Farnham, Boyd & Co., for five vessels of the same class and type as the first ten which had proven so satisfactory. All these vessels have now been delivered and are being operated along routes and upon schedules so arranged as to give a regular service at short intervals to all points in the Archipelago. Through their instrumentality the insular government and the various bureaus thereof are able to keep in fairly close touch with all points in the islands, however remote; they furnish transportation for government mails and freight and quick transfer from one point to another when necessary of detachments of constabulary and other government officials and employees, and besides are valuable for coast-guard purposes in preventing violations of the customs law. They have proven especially useful during the last few months in the distribution of government rice. Each of these vessels has a small armament consisting of a Gatling and Colt rapid-firing gun, together with a number of small arms, so that they can be util

ized if needed in suppressing disorder. They have cost in the aggregate $1,057,000 and involve an annual outlay in their operation and maintenance of about $500,000. They have proved to be a wise investment, both from the standpoint of economy and efficient administration and indeed are indispensable.

LIGHT-HOUSE DIVISION.

The light-house division of the bureau, during the greater part of the year under the immediate direction of Capt. Henry Jervey and later under the direction of Capt. Spencer Cosby, U. S. Army, in addition to looking after the existing light-houses, has been engaged in making extensive repairs and improvements upon those already established by the Spaniards and has begun the construction of several other light-houses where they are imperatively needed. Besides many new minor lights have been set up and buoys and beacons located where necessary.

The report of Commander J. M. Helm, U. S. Navy, chief of the bureau of coast guard and transportation, is attached hereto and gives in detail the history of the operations of his bureau.

BUREAU OF POSTS.

There has been a steady increase in the business of this bureau during the past fiscal year. On July 1, 1902, there were only 90 post-offices in the entire islands. During the year there have been established 149 new post-offices and 30 have been discontinued, a net increase of 119. A money order business is transacted in connection with the postoffices at all important points. This bureau has been much hampered by the lack of satisfactory transportation and its inability to procure reliable postmasters at remote points where the business is small and the compensation nominal. The establishment of the coast guard and transportation lines above referred to, however, has done much to remove the first of these difficulties, and there has been a steady improvement in the promptitude with which mails are delivered; the second of these difficulties remains, but is being overcome as far as possible by utilizing American school-teachers or reliable Filipinos wherever available.

While much remains to be done in the matter of post-office extension and the delivery of mails at interior points, all things considered, the postal service has been efficiently conducted, and is being and will be extended as rapidly as possible. It costs the government for the fiscal year about the sum of $250,000 and its receipts were about $150,000, thus showing a deficiency of about $100,000.

The report of C. M. Cotterman, director of posts, is hereto attached and gives the requisite detailed information as to the operations of his bureau during the year.

BUREAU OF ENGINEERING.

This bureau was created on the 8th of January, 1903, by Act No. 584, and is under the immediate direction of the consulting engineer to the Commission. It has charge of reconnaissances, examinations,

surveys of rivers and harbor improvements, construction of sewers, waterworks, and other public works requiring engineering skill excepting the construction of public buildings, and excepting also the harbor improvements of the port of Manila. It is also given general charge and supervision of all provincial supervisors in so far as relates to the laying out and construction of roads, bridges, and other engineering works. It has made a survey of the harbors of Cebu and of Iloilo with a view to extensive permanent improvements. At this time Cebu and Iloilo are the commercial centers to which the greater part of the commerce of the Visayan Islands and the northern coast of Mindanao gravitates. These islands are important both for their size and natural resources. They produce hemp, sugar, and copra in very considerable and steadily increasing quantities and are capable of great development.

Cebu and Iloilo are ports of entry to and from which foreign vessels come and go in considerable number. They are growing in population and business and their customs receipts are steadily increasing. At present in both of these harbors vessels of large tonnage are compelled to lie off at considerable distance from the shore, which makes it necessary for all freight to be lightered in taking on and discharging cargoes. This causes much expense and delay and constitutes a heavy burden upon commerce, and is a serious drawback to the prosperity of the islands.

As a result of the survey and soundings made in the harbor of Cebu a plan has been prepared for building a concrete masonry wharf about 2,500 feet in length which may be extended from time to time as the needs of commerce demand. Considerable dredging is necessary along its front and the material will be deposited behind the masonry wall, and thereby about 13 acres of very valuable land will be reclaimed which will belong to the insular government. This land will be subdivided, upon a proper plan, into streets and lots, and the latter will be sold and utilized for business purposes. The proceeds of sales will pay a large portion of the money expended in construction. When this improvement is completed vessels of 23 feet draft will be able to lie alongside the wharf in safety and load and unload their cargoes. Bids for doing this work have already been advertised and will be shortly opened and contract awarded.

The city of Iloilo is located on the river of the same name, which empties into the channel separating the island of Guimaras from the island of Panay. This port has heretofore ranked as second in importance in the Archipelago. Now vessels of about 12 feet draft only can enter the river at high tide and are always liable to ground on the bar at the mouth of the river. Larger vessels are compelled to anchor in the channel a mile or more from town. The scheme of improvement for this harbor involves confining and deepening the channel of the river by means of dikes and dredging, and also contemplates proper provision for suitable walls and docks. Advertisement for bids for the doing of this work has also been made and the contract will doubtless be awarded at the same time as that of Cebu. An appropriation of $350,000 has been made by the Commission for the harbor of Cebu and $150,000 for the harbor of Iloilo. supposed, however, that these sums will be adequate to complete the improvements contemplated.