WALTER D. LOVELL

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE No. 4 OF THE COMMITTEE ON WAR CLAIMS, Wednesday, February 8, 1928. The subcommittee this day met at 3.25 o'clock p. m., Hon. Hubert

H. Peavey, chairman, presiding.

The CHAIRMAN. What is the pleasure of the committee as to the manner in which we shall proceed in consideration of H. R. 5944? (H. R. 5944 reads as follows:)

[H. R. 5944, Seventieth Congress, first session]

A BILL For the relief of Walter D. Lovell

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of the Treasury be, and he is hereby, authorized and directed to pay to Walter D. Lovell, of Minneapolis, Minnesota, out of any money in the Treasury not otherwise appropriated, the sum of $10,000, in full settlement for extra work, for which the Government has received the benefit and for which no payment has been made, and for losses suffered by reason of action of governmental agencies, by reason of increased cost of labor and materials, and other causes brought about by the late war with Germany, incurred by Walter D. Lovell, under contract for construction work at Rock Island Arsenal, Illinois, dated January 19, 1917, with the Chief of Ordnance, War Department, prior to the entrance of the United States into the late war with Germany, and thereafter completed.

The CHAIRMAN. The facts are stated at considerable length. This is a claim growing out of a Government contract entered into and negotiated in January and February, 1917, but it was actually completed and signed by the Government four days after the declaration of war, or on April 10, 1917. That is the date it was signed or approved by the Goverment. It had been signed by the contractor prior to the declaration of war.

Do you want to have these facts read and gone into in detail at this time? There is a statement of several pages.

Mr. WOODRUM. I do not know how we may know about the case unless the statement of it is read or we read it.

The CHAIRMAN. The report of the War Department will be read by the clerk of the committee.

(The clerk read as follows:)

Hon. JAMES G. STRONG,

Chairman Committee on War Claims,

WAR DEPARTMENT, Washington, February 25, 1927.

House of Representatives.

DEAR MR. STRONG: Replying to the letter from your committee dated February 2, 1927, requesting a report and recommendation relative to H. R. 16760, a bill for the relief of Walter D. Lovell in the sum of $10,000 for alleged losses suffered by him incidental to the construction of a certain Government warehouse, loading platform, and railroad track at Rock Island Arsenal, Ill., in 1917.

From the inclosed copies of records contained in War Department files and from the inclosed record of the Court of Claims decision, it is apparent that there is no legal liability on the part of the Government arising out of the allegations of the claimant. It is also apparent that a considerable part of any loss the claimant may have suffered was occasioned by his failure to heed the advice of the Government to visit the site prior to bidding, and his failure to comply with certain express conditions of the contract relative to first obtaining a written order to do work concerning which any dispute might arise.

If he is entitled to any relief it would seem to be based upon the fact that an unusual labor condition appears to have arisen during the construction work undertaken by the claimant whereby wages became higher and great difficulty was experienced in securing and retaining competent workmen.

In view of the fact that the Court of Claims has held that the Government is not legally liable in any amount to the claimant, any relief Congress may determine in his favor will be as an act of grace and I therefore refrain from commenting further on the merits of the case or from making any recommendation as to its disposition.

Sincerely yours,

DWIGHT F. DAVIS, Secretary of War.

The CHAIRMAN. Suppose we have the attorney, who is present, make a brief statement in response to the arguments presented in the report. You, Mr. Hendry, I believe, are familiar with the report.

STATEMENT OF M. W. HENDRY, ATTORNEY AT LAW,
WASHINGTON, D. C.

Mr. HENDRY. Yes, I am. I have represented Mr. Lovell for many years and I personally have handled the difficulties that have arisen out of this contract from the beginning. This contract, as you will note, was signed by Mr. Lovell before the war started and was entirely completed thereafter.

The facts are that at Rock Island, Ill., while Mr. Lovell was performing this contract, he was the only contractor there who had a lump-sum contract to complete a building at a certain lump-sum price. All other contractors around him there at the time had costplus contracts. Under the cost-plus system the more the job cost, the more profit the contractor would receive. Therefore it was in their own interests to increase the expenses of the construction. Lovell had to compete with that situation, and he had a lum-sum contract. Lovell had to complete the job within a specified amount or else he would lose. The other contractors did not have to worry about how much they paid their labor.

Mr. COHEN. How much is the entire contract?

Mr. HENDRY. The amount of the original contract?

Mr. COHEN. Yes.

Mr. HENDRY., I can not tell you right offhand. However, I can put it in the record.

'The CHAIRMAN. It is $10,443.

Mr. HENDRY. That is the amount of the claim.

Mr. WOODRUM. The question is the amount of the contract.

Mr. HENDRY. It is $31,920 or thereabouts. I am not absolutely sure about that, but I will find out definitely.

As I have said, the more the other contractors at Rock Island paid their laborers, the easier it was to get them away from Mr. Lovell. Therefore, in order to get labor Mr. Lovell had to pay these enormous prices, which, of course, were not anticipated when he took the contract. As a result of this contract, he lost, as he testified before

the Board of Contract Adjustments of the War Department. I have here [indicating] a sheet of paper that gives an itemized statement. The sum total of that may be less than $10,000, but whatever it is it represents what he lost and his claim. He is satisfied to take the exact amount of loss, which is set forth in his itemized statement. It is approximately $10,000. This case was before the Court of Claims, which tribunal found against us. We could not recover for increased wages due to the war.

Furthermore, you will find that we submitted a number of items to the Board of Contract Adjustments of the War Department. The first one is for work in connection with rock and amounts to $1,023. That is the item referred to in the report where it says that he was given notice to visit the site of the work before he bid, and if he had done so he would have seen the rock. The fact is that Mr. Lovell had the Government blue-print, which instrument he had been accustomed to bidding on. It showed the contour of the site. Consequently it did not seem necessary to him to go upon the site personally. When he did go upon the site he found an old, torn down Government building with blocks of stone over the entire site. If he had gone there he would have seen a hill, which might have relieved the situation somewhat. The facts are that the Government inspector at the time and the Government officers recommend, on account of this unusual condition of the site, that the man be paid, but they said he could not get it legally. The fact is that the Government had misled Mr. Lovell. The one objection is that Mr. Lovell did not visit the site. That is the only item affected by the failure to visit the site.

The other point is that he did not get his instructions in writing. The other items were approved because it was thought they were just. They were for extra work done beyond contract requirements. Mr. Lovell was there on the job and he was ordered to do certain work not within his contract. He protested when the work went beyond contract requirements and he also wrote to me about it. He asked me what he should do. He said he could not very well stop the work on them. To stop would destroy him. To stop would destroy him. After careful consideration of the matter I told him to go ahead and perform the work, at the same time serving notice upon the Government agent that he did so under protest because the work was beyond contract requirements. I advised him to file a claim for his work beyond contract requirements. All these items are extra work, as the War Department itself agrees should not have been done under contract requirements. The Government got the benefit of the I work, but the contractor did not get a cent for his work.

There is a provision in the contract which provides that before any claims for extra work will be entertained the order to do the extra work must be given in writing. Mr. Lovell asked for a written order directing him to do that work, but he did not get it. The Government maintained that the work was in fact not beyond contract requirements and the agent of the Government did not give the written direction. They wrote Mr. Lovell to that effect. Mr. WOODRUM. But now the Government admits that the work performed by Mr. Lovell was not within the contract requirements? Mr. HENDRY. Yes; the Secretary of War admits that it was not within the contract. The only thing Mr. Lovell could do, obviously,

under the circumstances of that hour, was to proceed under protest, which he did.

Mr. COHEN. He had done Government work before, I imagine? Mr. HENDRY. Yes.

Mr. COHEN. Then he knew the Government regulations?

Mr. HENDRY. Yes; that is true.

Mr. COHEN. If he had stopped work, they would have had to give him a written order, would they not?

Mr. HENDRY. There would have been a lawsuit for damages if the work had been stopped. If the work had been stopped, there would have been an assessing of damages against the contractor. Mr. Lovell did not know what to do. He wrote to me about the matter. The Government was then in complete control of everything and Mr. Lovell did not feel that he dared to stop the work. In that I agree with him. The only thing he could do was to say that he would go ahead with the work under protest, denying that it was within contract requirements. An important thing to remember is that the Secretary of War himself admits that the extra work was, as is claimed by Mr. Lovell, beyond contract require

ments.

Mr. COHEN. What is the date of the report?

Mr. HENDRY. February 25, 1927, is the date of the report read into the record. That is seven years later. The Secretary of War approved that.

Mr. COHEN. Were these facts submitted to the Secretary of War? Mr. HENDRY. The finding of the board would have been paid but for the fact that this technical point regarding getting an order in writing held it up. It was not claimed that he did not do the work. I consider this about as meritorious a case as I have seen presented. Mr. COHEN. Have you copies of the letters sent to the War Department and their acknowledgements of them during the time Mr. Lovell refused to do this work?

Mr. HENDRY. Yes; I have Mr. Lovell's testimony and the testimony of the Government officers also. That was taken when the decision was made by the Board of Contract Adjustments. Mr. Lovell was there and the Government was represented by its officers and counsel.

The CHAIRMAN. What is your explanation, Mr. Hendry, of the apparent inconsistency or difference in the findings in the War Department's letter of the present date, as against their findings in their disposition made at the time it was considered by the board?

Mr. HENDRY. I think this report really in a sense is not inconsistent, except it is so on a question of law. So far as facts are concerned it is consistent. One held that because he did not get his order to do this extra work in writing, he has no rights. We agree that he has no legal claim, but on the merits of the claim, he has a just case.

Mr. WOODRUN. Ordinarily in business affairs, the purpose of haying competitive bidding is so that when a man bids on a piece of work, if he makes money, he gets a profit, and if he loses, he is forced to take a loss. Why should that not obtain in this case? What is the difference between this and any other contract in which a contractor loses money? I do not think anybody would enter into a contract with a man and let that man say that he will flip the coin

and if he loses on the contract he should be paid. What is there to take this out of that category?

Mr. HENDRY. This is a contract, as has been said, that was entered into before the war, and before we knew the United States was going into the war. The work was all done during the war period and they lost this money in executing the contract. Congress has hundreds and thousands of precedents on this general point. There is no reason why they should give one man relief on the same state of facts upon which they refuse another man relief.

Mr. WOODRUM. One claim is based upon increase in labor and material on account of the war.

Mr. HENDRY. Yes; and the extra work performed beyond contract requirements.

Mr. CHASE. Is there any evidence to show that the gentleman you represent, because of the declaration of war, asked the Government to relieve him or did he go ahead in the hope of gaining and when he found he was losing he made up this claim?

Mr. HENDRY. At this time nobody thought of relief through Congress. They knew nothing about that. He knew well that it would be a ridiculous thing for him to got to the Government and ask to bẹ relieved from the contract. The Government would not have relieved him under any circumstances. On the other hand, obviously, nobody could see the far-reaching results of the war. This work actually started before the war began. Mr. Lövell started work before the actual ratification of the contract. He wanted to get a good start and the Government wanted the property as soon as possible.

The CHAIRMAN. What is your explanation of item 9, in regard to 20 per cent for profit and overhead expenses, $1,633?

Mr. HENDRY. If there is any profit in this thing, we will eliminate it. The CHAIRMAN. It says, "profit and overhead expenses."

Mr. HENDRY. That is a way a contractor puts his overhead expenses. That is 20 per cent. It is a way of finding overhead and that is all there is to it. It is not really a profit. However, if there is any doubt on that point, we will be willing to eliminate a small percentage.

The CHAIRMAN. If there is nothing further at this time, let us adjourn the hearing, and if it is desired that we want further information from you, Mr. Hendry, we will call for it.

Mr. COHEN. Can you furnish the letters you received and sent calling attention to the extra work-letters in which the Government directed that the extra work be performed and letters from Mr. Lovell protesting against it?

Mr. HENDRY. I will look those things up and send them in.
Mr. COHEN. Have you those letters?

Mr. HENDRY. I think probably I have.

Mr. COHEN. That would make a difference, in my opinion, if you made the demand.

Mr. HENDRY. Mr. Lovell personally went to the officer and protested against the doing of this work outside of the contract price. He verbally went to the officer and protested that the work requested was not within the contract requirements. Those letters were written at the time the work was going on.