Mr. KERR. How many bidders did you have on Garrison Dam? Colonel FERINGA. There were eight bidders, sir.

General WHEELER. Only the big fellows can bid on a job like that. Mr. ENGEL. When I came through on the trip from Fort Peck all the way down to Cairo and back up, between 4,000 and 5,000 miles, by automobile and partly by boat down the river, I talked to a number of contractors, and they were very much worried about the uncertainty of a program.

For instance, here is a contractor going in, and he moves this heavy machinery on the job. Take Garrison Dam, where that man bid $1,000,000 below. He has moved his machinery in. And take it down on those levees in Mississippi, where they use those big trucks, 14- and 15-cubic yard trucks. They are moved in there. Now, what is the result when the funds are frozen after Congress has made them available, and when the Army engineers are compelled to go in, as they have done in the last year, and tell those men they must slow up because the funds won't be forthcoming? What is the result of that sort of program on the morale of the contractors in submitting future bids?

General WHEELER. Of course, that does affect adversely the morale of the contractor, Mr. Engel.

Mr. ENGEL. When he bids again, he is going to increase his bid to take care of that contingency that is liable to arise; is not that true? General WHEELER. Yes, sir.

Mr. ENGEL. And every other contractor is not going to take a chance. He cannot afford to have his machinery rust out instead of wearing out, because he cannot make money on machinery rusting out; is not that true?

General WHEELER. That is true; yes, sir.

Mr. ENGEL. In other words, his profit depends upon the efficiency of his machinery and the use of that machinery the fullest amount of time available and the largest type of machinery he can get on that type of contract at Garrison Dam; is not that true?

General WHEELER. Yes, sir.

Mr. ENGEL. Therefore, it is necessary for us to continue those contracts at the rate of construction which was contemplated at the time. the contract was let?

Colonel FERINGA. In the type of conference General Wheeler mentioned, we tell the contractors for a certain job "there is so much money available." And unless we can tell them there is a sizable amount of money available, the large contractors do not bid, and the costs are higher.

Mr. ENGEL. And even then, unless they are assured, even though you tell them it is available, unless they are assured those amounts are not going to be frozen, they are going to take that contingency into consideration when they bid?

Colonel FERINGA. Yes, sir.

General WHEELER. You asked about this bid that was $1,000,000 below the Government estimate, and Colonel Feringa explained it. We had a similar situation where that explanation would not fit. The contractor bid almost that amount below, and he was below the next low bidder by over that amount, and he came in to see us and said he had forgotten to include his plant rental. So even the large contractors make mistakes at times, and when you see a great difference like

that, the contractor is naturally curious as to whether or not his estimating staff has made an omission.

If he makes an error that the Comptroller General outlines is the kind that would be acceptable, then, of course, he can make a request for an increase. But in a case where the bid is reviewed by the estimating staff before it goes in, as this was, and a slight increase made, they do not allow the deficiency to be paid by the Government.

DISCUSSION OF GROUPING OF LARGE CONTRACTORS ON BIDS

Mr. CASE. General Wheeler, has there been any significant change in bidding in the last 60 days?

General WHEELER. You mean in the amounts of the bids?

Mr. CASE. Yes; with relationship to the estimates.

General WHEELER. There has been one development that has been of great concern to us, and that is the grouping of large contractors to bid on one job. We just opened a hospital bid out in Omaha. recently. The low bidder consisted of a group of five big contractors, any one of whom could have built the hospital alone. And there was only one other bid, and that was an individual contractor, a smaller

contractor.

I am concerned about whether combinations like that tend to restrict competition. If we can get bids that we consider reasonable, it is not disadvantageous to the Government to have such excellent contractors as a group get together on a job for actual construction, but the thing that is concerning us-and you asked whether we had any concern-is whether or not that is affecting the contract price. Mr. ENGEL. Was that the kind of contract you had in force at Chain of Rocks?

General WHEELER. Yes, sir.

Colonel FERINGA. There were six companies in it.

That is a combination bid, but there was good competition for the job.

General WHEELER. I have taken this combining of bidders up with the Associated General Contractors and told them I thought an association of that kind should consider whether they might not get to a place where the Government would go in and do the work itself especially if it is going to run up against a lack of competition.

Mr. CASE. That is not covered at all by the Sherman Antitrust Act or any of the other laws in restraint of trade?

General WHEELER. No, sir. I honestly do not believe there is any idea of limiting competition. Here is the answer they give me, and it is very simple. They divide the risk, and in these days of increased cost of labor and increased cost of materials on a job that is going to last 2 years or longer, the only thing for them to do is to divide the risk among the big ones. My answer to that is, "You have to add a profit for each of the big ones, which increases the profit." Perhaps if we would put in an escalator clause and back up that risk, maybe the Government would benefit by that. The general feeling of the Associated General Contractors is that they do not want escalator clauses on a job unless it lasts over 2 years.

Mr. KERR. How did the joint bids of those five contractors who took this job compare with the other single contractor?

General WHEELER. The single contractor was about $350,000 higher.

Mr. KERR. You evidently got bona fide competition there. General WHEELER. Yes, sir. We certainly got competition between the group of five and this lone contractor.

Mr. CASE. How did the bid compare with the estimate?
General WHEELER. It was very much above.

Mr. CASE. Whereas other contracts let in that same area in the past 6 months seem to have been below the estimates in that division? General WHEELER. Yes, sir; that is true, but not on building construction. We have not had the experience of any bids coming in below the Government estimate on building construction.

Mr. CASE. Of course, this is a tendency which, if it should develop to any extent, would be one that would concern Congress a great deal, and we might have to put

General WHEELER. We have the same thing down in Judge Kerr's area now on the Buggs Island Dam. We just opened bids day before yesterday on that. The low bidder is a group of seven contractors, all big contractors. The next low bidder is a group of two, and the third low bidder is a group of four. We had a total there of 13 big contractors bidding on that job, but only presenting three bids.

Mr. CASE. How did the low bid there compare with the estimate? General WHEELER. It was considerably above-33 percent above. As I remember, the Government estimate was about $11,000,000, and the low bidder was about $15,000,000. But these three groups had just about the proper spread to indicate independent estimating. Mr. CASE. Of course, the Congress has been concerned with any tendency to combine in restraint of competition. Also, Congress has been concerned when we found costs were excessive. There have been two ways in which that problem has been approached historically. One has been for the Government to do the jobs by force account or purchase and hire, and the other has been to adopt such methods as we did during the war of a renegotiation based upon accounting costs. It seems to me the contractors of the country should take notice of this concern of Congress on this thing, and they would be well advised to avoid adopting bidding practices which would result in taking steps of that sort. Certainly the contractors of the country protested a great deal in connection with WPA construction on that method of handling work, but if they combine in their bidding to an extent which would alarm Congress, Congress might be disposed to take steps which the contractors would regret.

General WHEELER. May I tell you the planning we are doing in connection with this Buggs Island contract? The low bidder says our Government estimate was wrong. We had previously checked it independently in several offices, and we decided our Government estimate was correct. So we are going to meet with him, and we are going to lay his bid on the table along side of our Government estimate, and we will go over each item. He is going to try to show us that our Government estimate is too low.

Mr. CASE. In this case of Buggs Island, you have not let that contract?

General WHEELER. Oh, no, sir; we have not, and the way it stands now we should not let it. If the Government estimate is correct, we should not let the contract on the basis of the bids received. We could either readvertise, or do the work ourselves. I have explored the proposed work enough to believe that we could do it ourselves

reasonably close to the Government estimate. But we would not want to do that without explaining it to this committee, because we have always told you that we advertise these jobs for competitive bidding, and so far we have not had to undertake a job like this.

Mr. CASE. I hope you will not hesitate to present it to the committee if this tendency develops that you are getting bids that are far in excess of the estimates.

General WHEELER. No, sir; I can assure you we would report it. We are still studying and considering the matter. You can take jobs like Buggs Island and divide them into smaller parts, but we have always had the feeling that the larger the amount of work you could get into one contract, the more economical it is for the Government. However, on big jobs like that, you cut out the little fellow. If you can break it up into small parts, that lets the smaller contractor in. He has less overhead and less organization charges to incur and he can bid against the big fellow on a small job.

Mr. CASE. Of course, there are two distinct types of pools. One of them is where there are very large contractors, any one of whom could handle the job, and then you have the type of pool bidding where you have smaller contractors who are specialists in one particular line, such as handling plumbing, brickwork, and things like that, who make a pool bid on a contract.

General WHEELER. Yes, sir.

Mr. ENGEL. I have had quite a lot of experience along this line. Back in 1921, when Groesbeck was elected Governor of Michigan, we were starting to build concrete roads, 26 years ago. He called me in one day and had three jobs with three bidders on each job, the same three bidders, and if he let the job to the lowest bidder, each man got a job at a price which was about 40 percent higher than it should have been. He rejected the bids and asked for new bids. They were not building many concrete roads in those days, and he got no bids. Then he went into the prison and used prison labor with the State highway department of engineers, bought the equipment, and constructed, as I recall, 20-foot concrete roads for about 20 percent less than the 18-foot concrete road, on the average, had been costing before.

Then the cement group were charging the State 10 cents a barrel dealers' profit, which the dealer did not get, and also Buffington, Ind., to Alpena, Mich., freight charges. For instance, the cement was hauled from some plant nearby, and still the State had to pay a 10 percent dealers' profit, which was pocketed, and the freight from Buffington, Ind.

The State went ahead and bought a cement plant and the result was that the cement group got no contract. You cannot do that unless you are going to eliminate free and fair competition in any of the contract work we are doing here; it will cut it out entirely.

General WHEELER. Yes, sir.

Mr. ENGEL. And I want to say as chairman of the committee that I for one will support Mr. Case's position 100 percent.

General WHEELER. Thank you. Exploring that thought a little bit further, may I say that we do not have any labor organization at all, and therefore we would have to set one up.

Mr. ENGEL. On the other hand, if you have far competition you may be the target, but the man who is being hit otherwise is the taxpayer.

General WHEELER. Yes, sir.

Mr. CASE. Some reference has been made to freezing funds. Do you have any funds frozen at this time?

General WHEELER. No, sir; we do not.

INCREASE IN MAINTENANCE COSTS

Mr. TIBBOTT. General Wheeler, has the cost of maintenance increased?

General WHEELER. Yes, sir.

Mr. TIBBOTT. Compared to construction?

General WHEELER. It is about parallel, because on both construction and maintenance there is labor and material, Congressman Tibbott; the cost of maintenance has generally about paralleled the cost of construction.

AVAILABILITY OF BIDDING CONTRACTORS

Mr. TIBBOTT. On the whole are you experiencing any difficulty in getting bidders?

General WHEELER. No; we have not had any difficulty yet, Congressman Tibbott. We have gotten a great many contractors bidding on the jobs, but as I said, many of them are in combination and that reduces the actual number of bids received.

Colonel FERINGA. We have had a good average on the number of contractors bidding.

General WHEELER. I can give you some statistics on that. On the 1st of January 1947 to the 18th of November 1947 we had 591 bids opened on which we averaged 5.1 bidders for each bid opened, and the average percentage above the Government estimate was 11 percent for all types of construction.

Colonel FERINGA. One of the things that General Wheeler has initiated throughout all of this work is prebidding conferences for the large jobs, and that has aroused interest on the part of all contractors. These meetings before the bids are opened are also attended by the individuals who sell equipment and supplies and they in turn pass the information on to other possible contractors. This procedure has been conducive to getting a larger number of bidders than we had been getting through the older system of merely advertising.

Mr. TIBBOTT. I think you are to be commended for doing that.

NUMBER OF NEW PROJECTS

How many new projects are included in the rivers and harbors justifications?

General WHEELER. Two new projects, sir; first St. Thomas Harbor in the Virgin Islands; and, second the Sacramento deep-water project. There is a total of 54-river and harbor projects before you and work has previously been conducted on 52 of them.

ESCALATOR CLAUSES

Mr. SCRIVNER. General Wheeler, you made a statement a few minutes ago about having escalator clauses in contracts. Normally when we think of escalators we thing of going up.