FIGHTING THE PROFITEERS
MANY MILLIONS SAVED BY REFUSING TO PAY EXORBITANT PRICES--"NAVY
ORDER" PREVENTED EXTORTION--OVER THREE BILLION DOLLARS EXPENDED
WITH NEVER A HINT OF GRAFT OR EXTRAVAGANCE--COMPETITION ADHERED TO
IN WAR--FEEDING AND CLOTHING 500,000 MEN A BIG TASK, ACCOMPLISHED
WITH SIGNAL SUCCESS--SAVING IN HUGE SHORE CONSTRUCTION.
The Navy spent over three billion dollars for war purpose without a
suggestion of extravagance or graft. To be exact, Congress appropriated
$3,692,354,324.71. Of the amount $334,360,000 were returned to the
Treasury, in February, 1919, and additional sums later by the sale of
excess supplies and vessels that were no longer needed.
The rule of the Department, "A dollar's worth of Navy for every dollar
spent," was adhered to in war as well as in peace. Early in 1917 steel
was contracted for at 2.90 for Navy ships when the price was soaring
in the market. Coal and oil and copper were purchased at reasonable
prices or commandeered. Manufacturers of torpedoes and smokeless powder
and other makers of munitions were held to reasonable profits. Where
munition or supply dealers wished more than a fair profit, a "Navy
Order" was placed.
The history of the "Navy Order" should be told, for it was the weapon
that saved the Navy from profiteering. Competition prevailed through
the war in all purchases except where the supply was inadequate for war
necessities. In some cases the exigency of war demanded commandeering
orders. Such orders were sometimes required because excessive prices
were quoted, but often because the only private concerns which could
manufacture the article needed were under contract for all their
output. If they furnished the government of their own will, they were
liable to the parties who had contracted for their product. In such
instances, a commandeering order was necessary both to obtain a war
necessity and to protect the manufacturers.
In the naval appropriation act a provision was early inserted, drawn by
Chairman Padgett, giving the power, when agreement could not be reached
as to the price for something essential, to commandeer it--whether
ships or land or munitions or supplies--and pay 75 per cent of the
appraisement, leaving to the owner the right to contest in the courts
the reasonableness of the compensation so fixed. That provision later
became applicable to all war agencies of Government. It was not often
invoked. The knowledge that the power was there and the declaration by
the Secretary of the Navy that he would invoke it when any excessive
price was demanded, and its use in some notable instances, made
profiteering on the Navy not easy, and it was seldom undertaken.
"Certain coal operators are demanding excessive prices for coal," said
an officer of the Supply Department when coal was necessary to bring
back soldiers and munitions from Europe and carry on naval operations.
"Place a Navy Order" was the direction, and the Navy secured its coal
from mines that produced Navy coal at prices that were not excessive.
At another time some oil operators, while selling oil to foreign ships,
were refusing to deliver any oil to our ships on a naval order.
"What shall we do?" asked the officer in charge.
"Order the Marines to seize the oil," was the direction.
The Marines had the reputation for carrying out orders. It was not
necessary for them to take the oil by force, but they were ready to do
it if the oil had not been furnished otherwise.
These two cases were exceptional and they occurred after the armistice.
As a rule, manufacturers and business men and bankers, as well as
farmers and mechanics, showed from the moment war began that they, like
our soldiers and sailors, had forgotten all selfish interests, all
class interests of every kind. While the fighting men in the field gave
the world a new conception of democracy, men of affairs were given the
opportunity which, with few exceptions, they embraced, of showing to
the world that the American's idea of his money, like his idea of his
life, was something which was to be freely and ungrudgingly given for
his ideals and his country whenever his country called.
One of the early supplies that had to be husbanded was coal. At a
conference of coal operators held in Washington in the spring of 1917,
an agreement was made for Navy coal at reasonable prices, all operators
to furnish their fair proportion to meet the needs.
In 1916 a board of officers in the Navy Department was named which was
an important step in preparedness. Its duties were to get together at
frequent intervals, to compare notes, to place on record probable needs
and then to find out definitely where the necessary supplies could be
obtained, in what quantities and how soon. Its work was most helpful
in securing active coöperation all along the line and also in pointing
the path--in a very modest way--toward the successful accomplishment of
the task which was soon to be faced by the War Industries Board. This
commodity-section plan, according to which the War Industries Board
effected its own first successful internal organization, originated for
naval uses in the Bureau of Supplies and Accounts, and, while the War
Industries Board rendered most useful and invaluable service to the
Navy, such help as was received related solely to priorities and to
items of supplies and services of which there was a shortage. So long
as supply exceeded or equalled demand and the usual orderly processes
of business could consequently function, the Navy's long-established
methods of procedure stood the test of war unchanged and unscathed.
The Navy, as did all other war agencies, leaned upon the War
Industries Board which, by priority orders, saw that war material
was furnished where most needed. Admiral Frank F. Fletcher was the
Navy's representative on the Board. He showed the same ability in that
important position which he had demonstrated when commander-in-chief of
the Atlantic Fleet.
The War Industries Board, which rendered invaluable service, was
made up of men who won national approval by their masterful handling
of the big tasks committed to them. Its membership was: Bernard M.
Baruch, chairman; Andrew Legge, vice-chairman; Robert S. Brookings,
Hugh Frayne, Rear Admiral F. F. Fletcher, Brigadier General Hugh S.
Johnson, Judge Edwin B. Parker, George N. Peek, J. L. Replogle,
L. L. Summers; H. P. Ingels, secretary; Albert C. Ritchie, general
counsel; Herbert Bayard Swope, associate member of the board, assistant
to chairman. Admiral C. J. Peoples was the Navy representative on
priorities.
All supplies for the Navy, except such as were regulated by priority
orders, were obtained throughout the war by formal contracts entered
into after the widest possible public competition in the open market,
the only restriction being that--as required by Section 3722 of the
Revised Statutes of the United States--no person was allowed to bid
unless he was a manufacturer or regular dealer.
Throughout the war, all formalities attendant upon the opening of
bids were strictly adhered to. The proposals were opened every
day--sometimes far into the night--and read out publicly, each bidder
having ample opportunity to know his competitors' offers and also to
be sure that his own were not overlooked. Even in the few cases where
military secrecy was obligatory, there was still genuine competition.
The eight bidders, for instance, on the mines for the North Sea Barrage
were invited to meet each other and the purchasing officials in a
locked and guarded room, even these confidential bids being strictly
competitive.
The idea in all business dealings by the Navy was that every single
transaction--indeed every part of every transaction--must not only be
right but look right.
It is scarcely to be wondered at that by following this rule and also
by giving prompt inspections and making immediate payments, the Navy
throughout the war maintained most cordial relations with a business
public which well knew that every contract was awarded to the lowest
responsible bidder whose goods were up to the standard required by
specifications and fit for the use for which they were intended. It
was largely for this reason that the purchasing machinery was able to
expand so enormously without confusion or delay. In one day during
the war the purchases amounted to over $30,000,000, as compared with
$19,000,000 during the heaviest pre-war year.
Looking back at it now, the mere suggestion of waiving competition--and
thereby striking at the very foundation of the system--brings a smile
of incredulity. But it was no joke at the time. Scarcely had war been
declared when requests came from a number of quarters for authority
"to cut red tape" by doing away with competition, the argument being
advanced that deliveries could thereby be expedited and important
work accelerated. The idea was not easy to suppress, because its
many advocates really believed they were right and insisted upon
convincing superior authority. The answer was that competition was
bound to speed things up rather than retard them and that, in any
event, the responsible officials in Washington had given the matter due
consideration and decided definitely and finally that competition must
continue uninterruptedly, as to everything except where the demand so
largely exceeded the supply as to compel priority orders.
The record of the commissary branch--and this applies to the hundreds
of thousands of soldiers transported overseas and back as well as
the half-million men within the Navy itself--was one of unqualified
success from first to last and one of which the service has good reason
to be proud. Never were men in uniform so well fed or was so much
attention paid to a balanced and abundant ration. "Only the best (with
no substitute said to be 'equally as good'), is good enough for our
fighting men," was the motto of Rear Admiral Samuel McGowan, Chief of
the Bureau of Supplies and Accounts, and his capable assistants, who
took the greatest pride in seeing that men in the service never even
knew, except by reading in the papers, that Government restriction was
put upon the quantity and kind of food for civilians.
With respect to the forwarding of supplies of every description to
the forces abroad, an intra-bureau order issued by Admiral McGowan in
July, 1917, directed that every wish of the senior naval officer in
European waters should be complied with on the same day that it became
known--indeed that the discretion vested in the Chief of the Bureau of
Supplies was already exercised when the needs of European forces were
made known.
When the armistice was signed and demobilization followed, there was
on hand a quantity of supplies in excess of prospective needs. The
same supply officers, who had so capably provided for the Navy's wants
during hostilities, promptly inaugurated a selling campaign; and, on
the first $70,000,000 worth of surplus thus disposed of, the Government
realized a net profit of more than three millions.
Throughout the entire ordeal--preparation, operation,
demobilization--the Navy's business organization functioned in all
its various branches with full one hundred per cent effectiveness.
So much so, in fact, that an investigating sub-committee from the
House Committee on Naval Affairs officially reported to Congress that
the Bureau of Supplies and Accounts "has won and well deserves a
nation-wide reputation for business efficiency."
In appreciation of the service rendered by Admiral McGowan, Congress
passed an act authorizing his retirement earlier than the usual time
prescribed. This recognition was limited in its terms, applicable only
to the Paymaster General, the Surgeon General and the Chief Naval
Constructor. And no special distinction was ever more deserved.
Sound business principles were adhered to when it became necessary to
give navy orders and provide funds for enlargement or construction of
plants. Reference has been made to the methods of securing munitions of
all characters. When it was necessary to take over an optical plant,
for example, expert ordnance officers carried on its operation without
injury to the rights of its owners, and expert accountants kept all
transactions in accordance with the most approved business practice.
Most of the great construction was done under contract, as for example
the giant armor plate and projectile plant at Charleston, W. Va., and
the big dry-docks at Philadelphia and at Norfolk.
[Illustration: A GENERAL VIEW OF BANTRY BAY
At Berehaven, in Bantry Bay, the Americans maintained a large submarine
base.]
[Illustration: A CLOSE-UP VIEW OF AMERICAN "SUBS" AT BEREHAVEN]
When the demand for new and larger training stations and other shore
establishments, which ran into hundreds of millions of dollars, made
it impossible to secure fixed price contracts, the supervision of the
work was so efficient in the few cost-plus contracts that the cost
was less than if undertaken under contract at a fixed price. This was
notably true of the two mammoth office buildings occupied by the Navy
Department and certain divisions of the War Department. The story of
these two buildings--the largest office structures in the world--is
interesting. The need for more space by the two war departments of
the Government was recognized, even after temporary modern structures
had been completed. Congress was asked for relief, and plans were
presented. The Navy urged upon the Chairman of the House Appropriations
Committee the construction of fire-proof concrete buildings instead
of the flimsy wooden fire-traps built in the hurry of the outbreak of
the war. The suggestion met with favor, and the Navy was authorized
to proceed with the construction of both buildings, the one for the
Army as well as the one for the Navy. Under the direction of Captain
A. L. Parsons, U. S. N., these structures were completed within five
months at a price lower than the sums estimated by most contractors.
They stand today as the best arranged office buildings in Washington, a
monument to naval business methods and construction efficiency and to
the wisdom of Congress.
[Illustration: RODMAN AND BEATTY
Rear Admiral Hugh Rodman, who commanded the American battle squadron in
the North Sea, and Admiral, the Earl Beatty, commander-in-chief of the
British Grand Fleet.]
The vast shore construction program, involving more than $300,000,000,
was carried out with the greatest energy and efficiency by the Bureau
of Yards and Docks, under the direction, first, of Admiral F. R. Harris
and, later, of Admiral Charles W. Parks. The civil engineers, permanent
and reserve, who directed shore construction in this country and in
Europe, more than measured up to war demands.
The Board of Compensation, of which Admiral Washington Capps was
made chairman, rendered service beyond computation in protecting the
government in all "Navy order" contracts. Millions of dollars were
saved by the thoroughness and efficiency with which this important
board performed its manifold and difficult duties.
The only criticism of the Navy voiced during the war was that it was
too insistent upon holding on to peace-time competition and economies.
One officer complained that I "held up an order for torpedoes." He was
correct. It was held up long enough to secure a conference with the
makers. By a few days' delay on one order, $5,000,000 was saved, and
we always had an abundant supply. In one order for shells $200,000
was saved. Such instances could be multiplied many times. Insistence
upon competition, where possible, and strict inspection in other
cases, enabled the Navy to close the war with the assurance that naval
expenditures were as free from extravagance as they were untainted by
graft or favoritism.