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theater of war. Consequently these estimates which are now before you are intended to provide artillery for a second million men which thus far no steps for raising have been taken except the registration.
These two items of artillery expenditure, namely the one for completing the equipment of the first million men and the one for the second million men, will require, respectively, about $328,000,000 and about $530,000,000.
In addition, the ammunition for these forces will have to be put in manufacture as soon as we can. There should be included in the ammunition for this first million men both the amount for the original supply which each battery should have when it goes into the service, and also an amount which that battery is likely to expend in action and in target practice until a date which we have selected as September 1, 1918. Now, the total value of all that ammunition, namely, the original supply based on a plan which I will give you in a moment and the expenditure, both target practice and action, based on an estimate which I will give you in a moment, is $1,421,000,000, about, of which there has been appropriated already $410,000,000, leaving a balance of $1,011.000 required for that purpose.
Now, for the second million men, for which we expect the armament to be ready by about a year from now or something less than a year, I have estimated for the original allowance only, the initial supply, and none for expenditure, as it is not expected they will get into action during the time that this appropriation is expected to provide for. That sum is $353,000,000, about.
The committee is perfectly aware of the fact that we are probably more behindhand in our equipment of artillery for the United States forces than with regard to any other class of armament, except possibly machine guns. This shortage is important not only because of the length of time it takes to construct this class of material, and particularly field artillery, but also because of the fact that the plan for its manufacture and the knowledge for its manufacture are special, and because of the failure to follow an adequate program of construction in the past, we not only have not got the material, and particularly the artillery material, but we have not got the plants to make it in. The plants are limited in extent.
Therefore in endeavoring to meet this situation and remedy it it is necessary to provide for the construction of several plants before we can commence the construction of the artillery, which is a very pressing reason for having this money, or the authority to use it at least, made available as quickly as possible.
The second item of shortage, which I have just mentioned, namely, machine guns, is one in which there is also great need of the acceleration of the supply, and it enters as another large item in these estimates. The subject of machine guns has been gone over so much before you that I do not think it is necessary for me to detail much of the past history, but one thing that I think I ought to say is that it seems with every month the estimate of the machine guns needed, resulting from the current experience in the European war, increases, so that the figures for equipment are now greater than any that have ever been presented to you before, and whether they are as great as they will be a month from now, I think is very doubtful.
Those classes of items constitute the principal ones in the estimates for the Ordnance Department which are before you. I think that the others I can deal with as we come to them successively in considering the bill which has been drawn up embodying the estimates.
I make this general statement because I would like to have the mind of the committee prepared in advance for what I shall probably ask you to consider carefully as we go along, and that is the necessity for an early start; the necessity for the immediate availability of these appropriations. They ought to have been available before now. With all the labor that my department has had to perform with reference to getting this war started, it was not until the early part of June that we were able to formulate this artillery program. We did get it formulated in the early part of June. The time that has been spent since then has been spent in refining it and in getting what is necessary, in accordance with our way of doing things, namely, the assent resulting from conviction of the various minds which have had to have the subject presented to them and have had to be convinced.
ERECTION OF PLANTS FOR MANUFACTURE OF ARTILLERY, We have not been able to start with a large part of our program of construction up to the present time because of the impossibility of doing so without having the funds for carrying through the program authorized, either for expenditure or for obligation. It is true that the sums which were appropriated in the last act were much greater than we have been able thus far to expend. We have not made very much impression on the expenditure of those funds. They have to a considerable extent been obligated, but of course they will not be expended until there is production calling for the expenditure. To a certain extent I have used a part of those funds in such a way that the funds themselves will not be adequate to carry out their purpose. I have done it in this way: The amounts appropriated took into very moderate consideration only the necessity for using a part of them for the construction of plants, and as it became more apparent that considerable amounts will be required for plants, I have used such an amount for erection of plants that there is not enough left to provide all the artillery that the funds were originally intended to provide. I have done that only to a moderate extent, because I hesitated to do it at all, but I felt that the situation called for it imperatively. I will tell you when I come to it the amount that has been used in this way.
Now, aside from my unwillingness to put the subject before the Secretary of War and the hesitancy of the Secretary of War to authorize expenditures in such a way that the appropriations could not entirely meet their object, I met another obstacle in pursuing this course of providing for the erection of plants. These plants have been provided for by a method such that even when they are erected by private organizations, and perhaps on private property, the expense of their erection will be borne by the Government, and the temporary buildings, the equipment of machinery, power, etc., would remain the property of the Government. The plants have been erected by the private organizations. That was the only way possible; the Gorernment did not have an organization and could not make one in the time that it is desirable for carrying out such great work. There is to be no profit to these private organizations in erecting these plants. The work now going on will be done for cost only, and the profit of the organizations will only commence when they commence the
manufacture of the artillery for which these plants are erected. Some of them have been unwilling to use their organizations in the erection of these plants unless they had an assurance of occupation for the plants, which, in the absence of appropriations, could be given them to no greater extent than is involved in the information that estimates which would afford occupation for the plants had been submitted to Congress. Therefore the commencement of the erection of a number of plants that we would like to see in process has been
Mr. GILLETT. And will be delayed until this bill is passed ?
Gen. CROZIER. Apparently until we get some authoritative assurance that there will be occupation for them. Under these circumstances, I will be glad if the committee will consider in the beginning the desirability of taking some action which will permit these plants to be started. I do not know exactly the form that that action could take. I could make one or two suggestions. One would be that a resolution might be passed which would authorize a certain percentage of appropriations which had already been made for purposes necessary in the prosecution of the war, but different from the purposes for which they had been directly made, to be used. That would scarcely meet the situation that I am talking about, because the difficulty is there has not been sufficient funds appropriated for this program; the program has never been submitted to you before.
The CHAIRMAN. How much is required for that purpose ?
Gen. CROZIER. The total cost of the plants that will have to be established for the manufacture of artillery is about $35,000,000; that is, the plants for the construction of artillery pretty nearly, not entirely, form the bulk of those which will have to be provided for in
The passage of a joint resolution of the kind I have just mentioned would, however, free us for making certain kinds of expenditures for which there was no appropriation in the act of June 15, because there was no estimate before you. As an illustration of that, I can refer to the estimate of $3,000,000 for a new proving ground which is now before you and is very much needed here in the East. You appropriated for a proving ground in the West, and we are in the process of getting it, but, as I will explain later on, we are greatly in need of a proving ground in the East, and I have submitted an estimate of $3.000,000—a resolution which will permit us to make that expenditure ought to be made just as soon as possible. In order to make more money available some act must be passed which is in the nature of an appropriation, the very thing we are talking about now. For that purpose the only suggestion I can make would beI do not know how this would accord with the rules of Congress-a resolution authorizing the President to incur obligations for the armament of the forces necessary for prosecuting the war against Germany.
The CHAIRMAN. Without any limitation?
The CHAIRMAN. Of course, it would take just as long to pass that joint resolution as to pass this whole appropriation bill.
Gen. CROZIER. I thought the first suggestion might be put through quickly.
The CHAIRMAN. There is another alternative. Congress, in order to provide for just such situations as this, put at the disposal of the President $100,000,000. Have you applied for an apportionment from that fund?
Gen. CROZIER. I have not made a formal application for this particular purpose, Mr. Chairman. I made one application for another purpose and did not get it.
The CHAIRMAN. You did not take that as conclusive upon all your applications?
Gen. CROZIER. I thought it was illustrative. I can make another application, of course.
The CHAIRMAN. Personally, I do not see how it would be possible to handle this in piecemeal with different resolutions, because what you say is imperatively essential shall be done for you is stated by officers from a number of other branches of the War Department, and by the time we would include all those things which have to be done immediately we could get the bill through. Gen. CROZIER. As far as that is concerned,
I can only suggest that the committee would have to use its judgment. I present the program of artillery construction. You all know that is a matter requiring a long time. Of course, you can look ahead and form an estimate of the number of troops that artillery ought to be provided for and the length of time which will be required to provide any artillery if you should start now. When you do that, it seems to me there is only one conclusion possible either we will not raise those troops at this time or they will not have artillery if they are raised, or else we must in some way or other start to get the artillery.
The CHAIRMAN. I do not think that any time will be consumed in the proper consideration of the bill if it is going to have any effect whatever in delaying the acquisition of the Artillery. Certainly Congress has not delayed it in any way; it has worked just as rapidly as it could. These estimates were delayed in transmission to Congress a much longer time than they have been before us. The delay was in the executive department of the Government and not in the legislative.
Gen. Crozier. The newspapers contained a statement that Congress was not going to take action on the present estimates, and I was disturbed by that report, which may not be true.
The CHAIRMAN. Before you take up the items specifically, General, you have been speaking about the policy of enlarging plants in order to acquire the manufacturing capacity needed, and this is done by arrangement with existing plants. What are the arrangements made where the Government invests its money in a plant upon land owned by a going concern?
Gen. Crozier. Usually the arrangement is that the company will be authorized to erect a plant consisting of buildings and equipment up to a certain specified limit of cost, and that the buildings, which are required to be temporary in their character, and the equipment will remain the property of the Government, but can be used by the contractor in prosecuting the Government's work, and upon the conclusion of the contract shall be removed by the Government within a stipulated time or otherwise disposed of. Then the contract provides a certain amount of material shall be constructed with this plant upon certain terms which vary somewhat in the different contracts. The ordinary form is that the consideration paid the contractor shall be the cost of production plus a profit, and that profit may either be in the form of a percentage or it may be a fixed sum, and in several cases we have made it a fixed sum per unit of the articles produced; and in some cases we have introduced a stipulation that the profit shall vary and shall increase if the cost is diminished and shall decrease if the cost is increased over a certain estimated figure.
Mr. Sisson. When you give a fixed sum for an article you have nothing to do then with the cost of production. You put the plant in and give Government aid, and they then get so much for each unit produced irrespective of the cost of the unit.
Gen. CROZIER. The amount they get for each unit produced is usually based on the estimated cost of that unit.
Mr. Sisson. That is true, but after you shall have made the contract the unit cost would be irrespective of the cost of manufacture. They take the chances in that sort of contract of producing the article at a profit.
Gen. CROZIER. No; they do not take many chances. The Government pays the cost and in addition pays them a fixed sum for profit. I say a fixed sum, but usually the sum is not entirely fixed because we put in an incentive for the manufacturer to try to keep the cost down by saying that if the cost shall be less than a certain estimated amount, the profit shall be correspondingly increased, and that is arranged so that the benefit which the Government gets from the reduced cost greatly exceeds the benefit which the manufacturer gets by reason of the increased profit; and then on the other side, if the cost exceeds a certain estimated amount, the profit of the manufacturer is reduced, but there again it is never enough to make good to the Government the difference in cost. Then we have other forms of contract, which I have spoken of before to the committee in connection with different bills, in which the profit takes the form of a percentage on the cost. It is difficult in that form of contract to get a direct incentive to production, and in the cases where we have used that form of contract there was usually some other incentive which we relied upon to cheapen production.
Mr. Sisson. As a business proposition I like your last arrangement much better.
Gen. CROZIER. So do I, Mr. Sisson. There is an incentive in the last case to the manufacturer to make this fixed profit just as soon as he can. The more times he makes it in the course of a year, of course, the greater his yearly income, and he has that incentive to accelerate production, and if you accelerate production there are certain charges that necessarily come down. Of course, in accelerating production there may be over equipment or something of that sort, or over compensation to labor. Now, to meet that we put in the incentive of increasing his profit on a sliding scale, depending upon the cheapening of the cost.
Mr. Sisson. There is an incentive for efficiency in the cost of production where the profit increases with the decreased cost of the product.
Gen. CROZIER. Yes, sir.