sum fees applying between specific cost limits. The last items of the schedule of fees read as follows:

If the cost of the work is over $9,650,000 and under $10,000,000 a fee of 24 per cent. If the cost of the work is over $10,000,000, a fee of $250,000.

The clause respecting the total fee was also changed and made to read as follows:

The total fee to the contractor hereunder shall in no event exceed the sum of anything in this agreement to the contrary notwithstanding.

It was thereafter the practice of the contracting officer to insert, in the blank space of this clause, an amount ascertained by applying the schedule of fees to the estimated cost. The effect was to eliminate any incentive for the contractor to increase his fee by exceeding the estimated cost. The Government retained the authority to reduce the fee if the actual cost were less than the estimated cost. The omission of this clause, in the first and second edition of the standard contract, was not important as to the National Army cantonment work, because the cost of these projects averaged nearly $10,000,000 each. A saving in fees would have been effected, however, if this clause and practice had been made effective for the construction of National Guard camps and for some of the miscellaneous contracts let under the second edition.

In the first and second editions of the standard contract the general contractor received a fee of 5 per cent on the cost of the work done by subcontractors. In the third edition the contractor's fee on such subcontract work was cut to 2 per cent, the schedule of rental rates was changed, and a wider variation was allowed in rental prices for equipment.

The fourth edition of the standard contract, issued in June, 1918, carried an affidavit which was appended to the contract and was to be signed by the contracting officer, that the contract made by him and the contractor was fair, was without any benefit or advantage accruing to himself, or allowing any such benefit or advantage corruptly to the contractor or any other person, and that the accompanying papers were all those relating to the contract.

The board concurs in the views and recommendations of the special committee of experts which, on March 15, 1918, reported on this form of contract. In Part I hereof it has stated its views, suggestions, and findings thereon in general terms and in detail. After careful study of War Department construction in the United States the board is of the opinion that this or some essentially similar form of contract and method of doing the work was necessary in order to obtain the requisite speed and quality of work and to safeguard the vital interests of the Government.

182545-2013

Some bureaus and corps of the Government and War Department did not adopt this form of contract or its scale of fees, and it is stated that many contracts in the Navy, in the Ordnance Department, and in other departments were let on a basis of cost plus 10 per cent. By using the standard Contract for Emergency Work instead of this basis the Government would have saved many millions of dollars. It is unfortunate that the Government did not generally adopt and use this standard form of contract.

The cost of Government construction projects usually exceeded the estimates. This was largely due to the advances in material and labor prices and to the fact that labor became scarcer and less efficient. Almost without exception the work planned for the various projects was increased. For the foregoing reasons it is perhaps safe to say that half the work performed by the Construction Division was done at the fixed limit prescribed in the standard contract, i. e., at the lowest percentage fee. The average fee paid to contractors on the cantonments was less than 3 per cent. This had to refund him his overhead and fixed charges and cover any profit received. Many contractors were ready and willing to undertake this work on these terms, for patriotic and other reasons. Moreover, there being little other work offering, it kept their organization intact. This was also greatly to the Government's interest.

CONTRACTORS' FEES.

The fees paid general and subcontractors on War Department work done under the Contract for Emergency Work were not high. On the contract they were exceedingly low as compared with the fees paid on prewar private construction. The total fees to the original general contractors for the 16 National Army cantonments amounted to 2.84 per cent of their cost and on the National Guard camps to 6.88 per cent of their cost, all these projects being done under the first and second editions of the Contract for Emergency Work, which allowed higher percentages on the lower costs than the later editions.

The total of all fees earned by general and subcontractors on 15 projects on which the data was available, including 7 cantonments, 1 artillery camp, 1 proving ground, 1 Army supply base, 1 picric acid plant, 1 nitrate plant, 1 storage depot, and 2 bag-loading plants and on which the expenditures as of June 30, 1919, were $161,629,507. amounted to $5,861,018.05, which is 3.63 per cent of the cost of the work.

10

A copy of the fourth edition of the Contract for Emergency Work will be found annexed hereto, Exhibit No. 2.

CONTRACTS FOR SUPERVISING ENGINEERS.

Of the three forms of contracts for the services of supervising engineers the use of Form No. 2, for general engineering, in which the fee was placed at three-fourths of 1 per cent of the total final cost of the construction project, was discontinued after its use on the first three cantonments, viz, Devens, Gordon, and Lee, as the fees obtained by this method were considered too large.

Form No. 3 was used on all subsequent projects requiring general engineering, and the supervising engineers' duties were extended to cover whatever engineering was necessary to be done on the basis of an arbitrary fixed sum, based on the size of the project, length of time necessary for completion, and character of service required. Some slight variations and additions were made to the form as originally drawn by the subcommittee on engineering of the committee on emergency construction of the General Munitions Board. These changes included:

1. Changing the designation of the officer representing the Government from constructing quartermaster to contracting officer.

2. The addition of an article preventing the assignment of the contract.

3. The addition of an article preventing the employment of convict labor.

4. The addition of an article providing against the payment of a contingent fee to any third person for soliciting or obtaining a contract or causing or procuring the same to be obtained upon compensation in any way contingent, in whole or in part, upon such agreement. The full report of the subcommittee on engineering of the committee on emergency construction of the General Munitions Board on compensation of engineers on construction work will be found annexed hereto, Exhibit No. 4.

ENGINEERING FEES.

The services required of a supervising engineer varied greatly on different projects depending upon the character of work entrusted to his care, the ability of his organization and the number of technical experts who were assigned to the commissioned staff of the constructing quartermaster.

The engineers of the country who were called upon to act as supervising engineers responded in a most satisfactory manner. Their attitude was one of willingness to render every engineering service asked of them, regardless of compensation or of their contractual obligations.

The supervising engineer handled the ordinary engineering problems and on projects involving industrial processes, such as the manufac

ture of powder, acid, etc., or where the process was a new one; consulting engineers were also employed for research work and for designing and supervising the installation of the special manufacturing plant.

The fees paid to supervising engineers, except on the three cantonments already mentioned and a few other projects, and the salaries paid to their assistants, were very small in comparison with the responsibilities involved and the fees commonly paid for similar services on private work. Many of the assistant engineers and other members of the engineering staffs were paid less than skilled labor. Plumber, carpenter, and bricklayer foremen, under the union scale of wages paid, often received more than the principal assistant engineer, whose maximum salary was limited by the contract to $350 per month. Common labor was paid as much and more than the transitmen, draftsmen, and inspectors of the supervising engineer's staff.

On 16 National Army cantonments, averaging in cost about $9,000,000 at the termination of the engineering contract, the supervising engineer's fees averaged about $15,300, which is less than twotenths of 1 per cent of the actual cost of the work, including the three cantonments above mentioned, on which the fee was fixed at three-fourths of 1 per cent.

On the 16 National Guard camps averaging in cost $2,460,000 at the termination of the engineering contract, the fees averaged $2,438, or slightly less than one-tenth of 1 per cent.

The Board of Review finds that on 87 projects, costing $497,697,948, the supervising engineers' fees amounted to $850,880.51, or a percentage of one-sixth of 1 per cent of the total cost of the work.

A comparison of the salaries of the engineering staff and the wages paid labor is as follows:

Engineering staff, maximum monthly salary:

Principal assistants..............

Assistant engineers and designers..

Instrument men.

Draftsmen..

Assistant clerks and rodmen.

Labor monthly wage, 10-hour basis:

Plumber foremen.

$350.00

250.00

175.00

125.00

90.00

354.30

354.30

315.30

306.90

291.00

150.00

Common labor, first class.

120.00

Common labor, second class..

105.00

Bricklayer foremen.

Carpenter foremen.

Plumbers and bricklayers.

Electricians and carpenters..
Common labor foremen..

SECTION 28.

PROCUREMENT DIVISION.

DUTIES.

This division institutes the fundamental standards and policies required for providing the Construction Division with material and the inspection of the same where this is done at the source. For that purpose:

(a) It mobilizes all of the principal materials required by the Construction Division. This mobilized material ordinarily constitutes all of the materials needed for a project except articles of incidental importance. It may be determined that such latter articles can be more advantageously purchased from local stock. Emergency reasons may also necessitate purchasing a small amount of principal materials from local stock on hand at the site of the project.

(b) It handled the clearance and allocation of supplies through the War Industries Board.

(c) It handled all applications for priority with the priorities committee of the War Industries Board.

(d) It acts as the procuring bureau for other divisions of the Army when so designated by the Director of Purchase, Storage and Traffic.

(e) It sees that supplies required by the Construction Division are procured through the proper bureau where a consolidation of procurement has been accomplished.

(f) It cooperates with the Inland Traffic Service on all matters relating to the ordering or cars, routing and transportation of freight and express.

(g) It purchases direct such equipment as may be from time to time decided upon as not physically attached to a construction element.

(h) It keeps in touch with the supply of materials with the end in view of furnishing information which will be of service in regard to the proper materials to be considered for various future projects.

(i) It inspects through a corps of properly qualified men at point of shipment the various kinds and classes of material which it is considered advisable to inspect before loading rather than after arrival at destination.

(j) It follows the progress of every order placed, beginning with its receipt by the manufacturer until shipment has been actually made. This is accomplished through the agency of a corps of field expediters attached either to the procurement office in Washington or to branch offices maintained in various production centers.

OFFICE PROCEDURE.

Requisitions for materials are based on schedules prepared by the engineering division or in the field. Such requirements are forwarded to the procurement division through the supervising constructing quartermaster who reviews all requisitions, especially with reference to dates and sequence of requested deliveries.

The procurement division is divided into two principal branches, materials branch and delivery branch.

MATERIALS BRANCH.

The materials branch is charged with the responsibility of disposing of all matters related to, or associated with, the allocation of materials.