A-89721, SEPTEMBER 30, 1938, 18 COMP. GEN. 262

A-89721: Sep 30, 1938

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DOES NOT VEST IN THE SERVICE-RENDERING AGENCY ANY AUTHORITY WHICH IT DOES NOT HAVE INDEPENDENTLY OF THE SAID PROVISION. IS NOT AUTHORITY FOR ONE GOVERNMENT AGENCY TO ACT AS A GENERAL CONTRACTING OR PURCHASING AGENT FOR ANOTHER GOVERNMENT AGENCY. 1938: THE UNITED STATES MARITIME COMMISSION AND THE NAVY DEPARTMENT HAVE JOINED IN REQUESTING DECISION OF WHETHER THE USE OF APPROPRIATIONS UNDER THEIR JURISDICTION IS AUTHORIZED IN THE PROPOSED PROCUREMENT FOR THE NAVY OF CERTAIN OIL TANKERS WHICH THEY REPORT ARE NOW UNDER CONSTRUCTION BY THE STANDARD OIL CO. OF NEW JERSEY AND ARE AVAILABLE FOR PURCHASE BY THE MARITIME COMMISSION FOR THE ACCOUNT OF THE NAVY DEPARTMENT AT A SUBSTANTIAL SAVING IN TOTAL COST AND AT MATERIALLY EARLIER DELIVERY DATES THAN SUCH TANKERS MIGHT BE ACQUIRED OR CONSTRUCTED OTHERWISE.

A-89721, SEPTEMBER 30, 1938, 18 COMP. GEN. 262

DEPARTMENTS AND ESTABLISHMENTS - SERVICES BETWEEN - AUTHORITY FOR CONTRACTING PURCHASE, AND CONVERSION OF TANKERS FOR NATIONAL DEFENSE SECTION 601 OF THE ECONOMY ACT OF JUNE 30, 1932, 47 STAT. 417, AUTHORIZING INTERDEPARTMENTAL FURNISHING OF SERVICES AND SUPPLIES UNDER THE CONDITIONS THERE OUTLINED, DOES NOT VEST IN THE SERVICE-RENDERING AGENCY ANY AUTHORITY WHICH IT DOES NOT HAVE INDEPENDENTLY OF THE SAID PROVISION, AND IS NOT AUTHORITY FOR ONE GOVERNMENT AGENCY TO ACT AS A GENERAL CONTRACTING OR PURCHASING AGENT FOR ANOTHER GOVERNMENT AGENCY, NOR FOR RECOGNIZING A PRIVATE AGENCY TO ACT AS A CONTRACTING AGENCY FOR ONE GOVERNMENT AGENCY THROUGH THE MEDIUM OF ANOTHER. IN THE REPORTED STATUS OF EMERGENCY NEED, AND IN VIEW OF THE REPRESENTATIONS, CIRCUMSTANCES, AND THE LEGISLATIVE HISTORY INVOLVED, PRESENT APPLICABLE APPROPRIATED FUNDS, IF ADEQUATE TO THE PURPOSE, MAY BE USED FOR THE ADMINISTRATIVELY PROPOSED ACQUISITION, BY THE MARITIME COMMISSION ON BEHALF OF THE NAVY DEPARTMENT, AND CONVERSION OF TANKERS NOW UNDER CONSTRUCTION FOR A PRIVATE CORPORATION UNDER AN ARRANGEMENT BETWEEN THE COMMISSION AND THE PRIVATE CORPORATION FOR THE INCLUSION IN SUCH TANKERS OF DESIRED NATIONAL DEFENSE FEATURES, ETC., PROVIDED THE PRESIDENT, UPON COMPLETION AND DELIVERY OF THE TANKERS TO THE PRIVATE CORPORATION, DECIDES THAT THEY THEN BE SO ACQUIRED AND CONVERTED.

DECISION BY ACTING COMPTROLLER GENERAL ELLIOTT, SEPTEMBER 30, 1938:

THE UNITED STATES MARITIME COMMISSION AND THE NAVY DEPARTMENT HAVE JOINED IN REQUESTING DECISION OF WHETHER THE USE OF APPROPRIATIONS UNDER THEIR JURISDICTION IS AUTHORIZED IN THE PROPOSED PROCUREMENT FOR THE NAVY OF CERTAIN OIL TANKERS WHICH THEY REPORT ARE NOW UNDER CONSTRUCTION BY THE STANDARD OIL CO. OF NEW JERSEY AND ARE AVAILABLE FOR PURCHASE BY THE MARITIME COMMISSION FOR THE ACCOUNT OF THE NAVY DEPARTMENT AT A SUBSTANTIAL SAVING IN TOTAL COST AND AT MATERIALLY EARLIER DELIVERY DATES THAN SUCH TANKERS MIGHT BE ACQUIRED OR CONSTRUCTED OTHERWISE, THE ENTIRE TRANSACTION TO BE ON A BASIS OF NO PROFIT TO THE STANDARD OIL CO. OF NEW JERSEY.

AFTER INFORMAL CONFERENCES IN THIS OFFICE WHEREAT, AMONG OTHER THINGS, IT WAS POINTED OUT THAT THE PRESIDENT MUST EXERCISE HIS PERSONAL JUDGMENT AND DISCRETION IN SUCH A MATTER, UNDER THE TERMS OF THE STATUTES INVOLVED, BEFORE THE USES OF THE NAVY APPROPRIATIONS FOR SUCH A PURPOSE COULD IN ANY CIRCUMSTANCES BE CONSIDERED AS AVAILABLE THE ACTING SECRETARY OF THE NAVY ON AUGUST 12, 1938, PLACED THE FACTS BEFORE THE PRESIDENT FOR HIS CONSIDERATION AS FOLLOWS:

AUGUST 12, 1938.

MY DEAR MR. PRESIDENT: WITH A VIEW TO OBTAINING THREE HIGH SPEED TANKERS FOR THE USE OF THE NAVY IN THE SHORTEST POSSIBLE TIME, THE NAVY DEPARTMENT, WITH THE MARITIME COMMISSION, HAS INVESTIGATED THE POSSIBILITY OF ACQUIRING THREE OF THE TANKERS ALREADY UNDER CONSTRUCTION FOR THE STANDARD OIL COMPANY OF NEW JERSEY FOR WHICH THE COMMISSION IS NOW UNDER CONTRACT TO REIMBURSE THE OWNERS APPROXIMATELY $880,000 PER VESSEL, REPRESENTING THE COST OF THE NATIONAL DEFENSE FEATURES. THIS TRANSACTION, IF CONSUMMATED, WILL BE ON THE BASIS OF NO PROFIT TO THE STANDARD OIL COMPANY.

BY THE ACT, APPROVED JULY 30, 1937, (PUBLIC, NO. 226), THE PRESIDENT IS AUTHORIZED "TO UNDERTAKE THE CONSTRUCTION OF CERTAIN AUXILIARY VESSELS OF ABOUT 36,050 TONS (LIGHT DISPLACEMENT TONNAGE)" INCLUDING "ONE OILER OF ABOUT 8,000 TONS.' THE FUNDS FOR THE COMMENCEMENT OF WORK ON THIS TANKER ARE MADE AVAILABLE BY THE NAVAL APPROPRIATION ACT, APPROVED APRIL 26, 1938 (PUBLIC, NO. 493).

THE SECOND AND THIRD TANKERS ARE AUTHORIZED BY THE ACT, APPROVED MAY 17, 1938 (PUBLIC, NO. 528), WHICH AUTHORIZES THE PRESIDENT "TO ACQUIRE AND CONVERT, OR TO UNDERTAKE THE CONSTRUCTION" OF CERTAIN AUXILIARY VESSELS, INCLUDING FOUR OIL TANKERS. THE FUNDS FOR THE COMMENCEMENT OF WORK ON THESE TWO ADDITIONAL TANKERS ARE MADE AVAILABLE IN THE "SECOND DEFICIENCY APPROPRIATION ACT, FISCAL YEAR 1938," APPROVED JUNE 25, 1938 (PUBLIC, NO. 723).

THE ABOVE-MENTIONED ACT OF JULY 30, 1937, REQUIRES THAT NOT LESS THAN FIFTY PERCENTUM OF THE VESSELS THEREIN AUTHORIZED, ALLOCATED ON AN APPROXIMATE TONNAGE BASIS, SHALL BE CONSTRUCTED IN GOVERNMENT NAVY YARDS. THE ACT OF MAY 17, 1938, AUTHORIZING THE FOUR ADDITIONAL TANKERS REQUIRES THAT THE FIRST AND EACH SUCCEEDING ALTERNATE VESSEL OF EACH CATEGORY SHALL BE CONSTRUCTED IN GOVERNMENT NAVY YARDS AS REQUIRED UNDER THE PROVISIONS OF THE VINSON-TRAMMELL ACT OF MARCH 27, 1934 (34 U.S.C., SEC. 495). BOTH OF THESE ACTS, HOWEVER, CONTAIN PROVISION WHEREBY THE PRESIDENT MAY, SHOULD THE PUBLIC INTERESTS REQUIRE, HAVE THE VESSELS BUILT IN GOVERNMENT OR PRIVATE YARDS NOTWITHSTANDING THE ALLOCATION OTHERWISE IMPOSED.

THE PLANS AND SPECIFICATIONS FOR THE THREE TANKERS NOW UNDER CONSTRUCTION FOR THE STANDARD OIL COMPANY BY THE SUN SHIPBUILDING AND DRY DOCK COMPANY AND THE FEDERAL SHIPBUILDING AND DRY DOCK COMPANY, WERE APPROVED BY THE SECRETARY OF THE NAVY BEFORE THE CONTRACTS WERE EXECUTED, AS REQUIRED BY THE "MERCHANT MARINE ACT OF 1936.' THE CONTRACTS WERE AWARDED, AFTER COMPETITIVE BIDDING, WITH THE APPROVAL OF THE U.S. MARITIME COMMISSION. THE COMMISSION BY ITS CONTRACT OF JANUARY 3, 1938, WITH THE STANDARD OIL COMPANY, AGREED, AS STATED ABOVE, TO REIMBURSE THE OWNERS FOR THE COST OF THE NATIONAL DEFENSE FEATURES INCORPORATED IN THE TANKERS, APPROXIMATELY $880,000 PER VESSEL.

THE ACQUISITION OF THESE THREE TANKERS THROUGH UTILIZING THE SERVICES OF THE U.S. MARITIME COMMISSION, AS AUTHORIZED BY THE ACT OF JUNE 30, 1932 (31 U.S.C., 686), WILL MAKE THE VESSELS AVAILABLE TO THE NAVY AT LEAST A YEAR EARLIER THAN IF THE REQUIRED CONTRACT PLANS AND SPECIFICATIONS WERE PREPARED TO PERMIT COMPETITIVE BIDDING AND DIRECT CONTRACTS ENTERED INTO BY THE NAVY. IN ADDITION, IT IS ESTIMATED THAT THERE WILL BE A SAVING IN GOVERNMENT FUNDS IF THE PROPOSED ACQUISITION IS APPROVED OF $1,500,000 OR MORE PER VESSEL.

THIS MATTER HAS BEEN THE SUBJECT OF AN OPINION BY THE JUDGE ADVOCATE GENERAL OF THE NAVY, ALSO THE GENERAL COUNSEL OF THE UNITED STATES MARITIME COMMISSION, A COPY OF EACH OF WHICH OPINIONS IS ENCLOSED.

THIS MATTER WAS SUBMITTED BY THE MARITIME COMMISSION TO THE COMPTROLLER GENERAL UNDER DATE OF JULY 19, 1938, REQUESTING INFORMATION WHETHER HE WOULD OBJECT TO THE PAYMENT AND TRANSFER OF FUNDS REQUIRED TO BE MADE UNDER THE PROPOSED ARRANGEMENT. NO DECISION IN THIS MATTER HAS BEEN MADE BY THE COMPTROLLER GENERAL.

THIS MATTER IS OF SUCH IMPORTANCE TO THE NATIONAL DEFENSE THAT IT IS SUBMITTED TO YOU FOR YOUR APPROVAL, NOT ONLY OF THE ALLOCATION PROPOSED, BUT ALSO THE PLACING OF THE ORDER BY THE NAVY DEPARTMENT WITH THE U.S. MARITIME COMMISSION, WHEREBY THE THREE TANKERS WILL BE OBTAINED FOR THE NAVY IN THE MINIMUM TIME AND AT A SUBSTANTIAL SAVING OF GOVERNMENT FUNDS.

SINCERELY YOURS,

(SIGNED) J. O. RICHARDSON, ACTING. THE PRESIDENT,

THE WHITE HOUSE. ENCLOSURES.

THE PRESIDENT INDORSED THIS SUBMISSION AS FOLLOWS:

SEC NAV.

OK

FDR

AUG. 15.

ON SEPTEMBER 17, 1938, A LETTER WAS RECEIVED FROM THE CHAIRMAN OF THE UNITED STATES MARITIME COMMISSION DATED SEPTEMBER 16, 1938, AS FOLLOWS:

REFERRING TO MY LETTERS OF JULY 19 AND AUGUST 19, 1938, REGARDING THE TAKING OVER BY THE NAVY OF THREE OF THE NATIONAL DEFENSE TANKERS NOW BUILDING FOR THE STANDARD OIL COMPANY OF NEW JERSEY:

INTERNATIONAL CONDITIONS HAVE REACHED SUCH A POINT THAT THE COMMISSION, AT THE SUGGESTION OF THE NAVY DEPARTMENT, HAS BEEN INVESTIGATING THE QUESTION OF EXPEDITING DELIVERY OF THESE VESSELS, CONTINGENT UPON THEIR BEING TAKEN OVER BY THE NAVY. AS A RESULT OF INFORMAL CONFERENCES WITH THE STANDARD OIL COMPANY AND THE SHIPYARDS IT HAS BEEN FOUND POSSIBLE, IN CASE IT IS DESIRED BY THE GOVERNMENT, TO HASTEN THE DELIVERY OF THESE VESSELS SO THAT THE FIRST AVAILABLE VESSEL CAN BE HAD BY THE NAVY IN THE LATTER PART OF DECEMBER OF THIS YEAR, WHICH IS SEVERAL MONTHS AHEAD OF THE CONTRACT DELIVERY DATE. THE SECOND VESSEL CAN BE HAD IN MAY OR EARLY JUNE 1939, AND THE THIRD VESSEL IN LATE JULY OR EARLY AUGUST 1939. THESE LATTER DATES MAY EVEN BE BETTERED.

IN VIEW OF THE CONDITIONS SET FORTH AND THE URGENT NEED OF THE NAVY DEPARTMENT TO OBTAIN VESSELS OF THIS TYPE, IT IS HOPED THAT A DECISION ON THE LETTERS HEREINABOVE REFERRED TO MAY BE REACHED BY YOUR OFFICE AT THE EARLIEST POSSIBLE DATE.

IN THE INFORMAL CONFERENCES WITH REPRESENTATIVES OF THE NAVY DEPARTMENT AND OF THE MARITIME COMMISSION, COUNSEL FOR THIS OFFICE SUGGESTED THAT IN THE ABSENCE OF A PERSONAL EXERCISE OF DISCRETION BY THE PRESIDENT AS VESTED IN HIM BY THE SEVERAL STATUTES INVOLVED, EXCEPTING THE PROPOSED TRANSACTIONS FROM THE OPERATION OF SUCH STATUTES, THERE COULD NOT BE APPROVED THE USES OF ANY APPROPRIATIONS WHICH MIGHT APPEAR TO AVOID BY INDIRECTION, FOR PURPOSES OF ECONOMY IN PROCUREMENT, THE APPLICABILITY OF THE WALSH-HEALEY ACT OF JUNE 30, 1936, 49 STAT. 2036, OR OF ANY OTHER STATUTE MADE APPLICABLE TO SUCH APPROPRIATIONS FOR THE PROTECTION OF WAGE SCALES, ETC. ASSURANCE WAS RECEIVED THAT NONE OF THE ECONOMIES CONTEMPLATED IS TO BE REALIZED THROUGH THE PAYMENT OF WAGES LESS THAN THE SAID APPLICABLE STATUTES PRESCRIBE. THE FORMAL STATEMENT IN THAT CONNECTION BY THE CHAIRMAN OF THE MARITIME COMMISSION IN HIS LETTER TO THIS OFFICE OF AUGUST 19, 1938, IS AS FOLLOWS:

IN DISCUSSIONS WITH REPRESENTATIVES OF YOUR OFFICE WITH RESPECT TO THE VERY SUBSTANTIAL SAVING TO THE GOVERNMENT TO BE EFFECTED THROUGH THE PROPOSED ACQUISITION OF THE TANKERS, THE QUESTION WAS RAISED AS TO THE AMOUNT OF SUCH SAVING WHICH MIGHT BE ATTRIBUTABLE TO A DIFFERENCE IN WAGES AND HOURS OF LABOR IN THE YARDS FROM THOSE WHICH WOULD BE IN EFFECT UNDER THE APPLICABLE PROVISIONS OF LAW IF THE WORK WERE BEING CARRIED ON UNDER CONTRACT WITH THE NAVY DEPARTMENT. IN MY OPINION, THE FACTS CLEARLY ESTABLISH THAT NO PART OF THE SAVING TO THE GOVERNMENT WILL BE THE RESULT OF ANY DIFFERENCE IN WAGE SCALES AND HOURS OF LABOR FROM THOSE WHICH WOULD BE IN EFFECT IF THE WORK WERE BEING DONE DIRECTLY FOR THE NAVY DEPARTMENT. FEDERAL SHIPBUILDING AND DRY DOCK COMPANY IS NOW CONSTRUCTING VESSELS FOR THE NAVY AT THE SAME YARD WHERE THE TANKERS ARE BEING CONSTRUCTED. THE HOURS OF LABOR, WORKING CONDITIONS, AND WAGE SCALE FOR THE NAVY AND FOR THE COMMERCIAL WORK ARE UNIFORM IN THE PLANT. SUN SHIPBUILDING AND DRY DOCK COMPANY DOES NOT HAVE ANY NAVY CONTRACTS, BUT IT HAS ON THE WHOLE A VERY GOOD LABOR RECORD AND ONE WHICH WILL COMPARE FAVORABLY WITH THE YARDS HOLDING NAVY CONTRACTS. FURTHERMORE, AS ABOVE NOTED, THE CONTRACTS COVERING THE CONSTRUCTION OF THESE TANKERS SHOW THAT THE AVERAGE HOURLY WAGE RATE PAID BY SUN SHIPBUILDING AND DRY DOCK COMPANY IS APPROXIMATELY 7 CENTS HIGHER THAN THAT PAID BY FEDERAL SHIPBUILDING AND DRY DOCK COMPANY.

THE OPINION OF THE JUDGE ADVOCATE GENERAL, APPROVED BY THE ACTING SECRETARY OF THE NAVY, AS IT APPEARS FROM THE COPY FURNISHED TO THIS OFFICE BY LETTER FROM THE SAID JUDGE ADVOCATE GENERAL DATED AUGUST 5, 1938, IS AS FOLLOWS:

AUGUST 2, 1938. FROM: THE JUDGE ADVOCATE GENERAL OF THE NAVY. TO: THE SECRETARY OF THE NAVY. SUBJECT: ACQUISITION OF THREE TANKERS FROM MARITIME COMMISSION. REFERENCE: (A) LETTER, SECRETARY OF THE NAVY TO THE JUDGE ADVOCATE

GENERAL, FILE A0/L8-3 (380106) OF EVEN DATE.

1. BY REFERENCE (A) THE OPINION OF THE JUDGE ADVOCATE GENERAL IS REQUESTED AS TO THE LEGALITY OF THE PLACING OF AN ORDER BY THE NAVY DEPARTMENT WITH THE UNITED STATES MARITIME COMMISSION FOR THREE HIGH SPEED TANKERS NOW UNDER CONSTRUCTION BY THE SUN SHIPBUILDING AND DRY DOCK COMPANY AND THE FEDERAL SHIPBUILDING AND DRY DOCK COMPANY FOR THE STANDARD OIL COMPANY OF NEW JERSEY.

2. AFTER COMPETITIVE BIDDING, CONTRACTS WERE AWARDED TO CERTAIN SHIPBUILDING COMPANIES BY WHICH THEY AGREED TO CONSTRUCT FOR THE STANDARD OIL COMPANY TWELVE HIGH-SPEED TANKERS. IN ACCORDANCE WITH CONTRACTS ENTERED INTO WITH THE STANDARD OIL COMPANY ON JANUARY 3, 1938, THE MARITIME COMMISSION AGREED TO MAKE REIMBURSEMENT OF APPROXIMATELY $880,000 PER VESSEL FOR THE NATIONAL DEFENSE FEATURES BUILT INTO THESE VESSELS. REQUIRED BY THE MERCHANT MARINE ACT OF 1936, THE PLANS AND SPECIFICATIONS WERE APPROVED BY THE SECRETARY OF THE NAVY BEFORE THE CONTRACTS WERE EXECUTED.

3. THE CONSTRUCTION OF THREE TANKERS HAS BEEN AUTHORIZED AND NECESSARY APPROPRIATIONS MADE FOR THE COMMENCEMENT OF WORK. THE FIRST TANKER WAS AUTHORIZED BY PUBLIC, NO. 226, APPROVED JULY 30, 1937 (50 STAT. 544), AND FUNDS WERE MADE AVAILABLE FOR COMMENCEMENT OF WORK IN THE NAVAL APPROPRIATION ACT FOR THE FISCAL YEAR ENDING JUNE 30, 1939 (PUBLIC, NO. 493), APPROVED APRIL 26, 1938 (52 STAT. 223, 242). THE SECOND AND THIRD TANKERS WERE AUTHORIZED IN THE NAVAL EXPANSION ACT (PUBLIC, NO. 528), APPROVED MAY 17, 1938 (52 STAT. 401), AND FUNDS WERE MADE AVAILABLE FOR THE COMMENCEMENT OF WORK IN THE "SECOND DEFICIENCY APPROPRIATION ACT, FISCAL YEAR 1938" (PUBLIC, NO. 723), APPROVED JUNE 25, 1938 (52 STAT. 1114, 1142).

4. THE PROPOSED PROCEDURE FOR ACQUIRING TANKERS HAS BEEN FULLY SET FORTH IN THE LETTER OF THE MARITIME COMMISSION DATED JULY 19, 1938, TO THE COMPTROLLER GENERAL.

5.THE SECRETARY OF THE NAVY HAS DETERMINED THAT IT IS IN THE INTERESTS OF THE GOVERNMENT TO PLACE AN ORDER WITH THE MARITIME COMMISSION FOR THE TRANSFER OF THE THREE TANKERS IN ACCORDANCE WITH THE PROCEDURE REFERRED TO IN PARAGRAPH 4. THIS METHOD OF ACQUISITION WILL RESULT IN A VERY SUBSTANTIAL SAVING TO THE GOVERNMENT AND, FURTHERMORE, THE TANKERS WILL BE AVAILABLE MANY MONTHS BEFORE THE DATES THAT COULD BE MET IF THE NAVY DEPARTMENT AWARDED CONTRACTS AT THIS TIME. THE PROPOSED PROCEDURE ALSO ALLOWS THE GOVERNMENT TO REALIZE IMMEDIATELY ON THE $880,000 INVESTMENT EMBODIED IN EACH VESSEL IN CONNECTION WITH THE NATIONAL DEFENSE FEATURES.

6. THE SECRETARY OF THE NAVY HAS AUTHORITY UNDER THE ECONOMY ACT (47 STAT. 417), APPROVED JUNE 30, 1932, TO PLACE AN ORDER WITH THE MARITIME COMMISSION FOR THE ACQUISITION OF THE THREE TANKERS. THIS ACT AUTHORIZES ANY EXECUTIVE DEPARTMENT, IF FUNDS ARE AVAILABLE THEREFOR AND IF IT IS DETERMINED BY THE HEAD OF SUCH EXECUTIVE DEPARTMENT TO BE IN THE INTEREST OF THE GOVERNMENT SO TO DO, TO PLACE ORDERS WITH ANY OTHER DEPARTMENT, ESTABLISHMENT, BUREAU, OR OFFICE FOR MATERIALS, SUPPLIES, EQUIPMENT, WORK, OR SERVICE OF ANY KIND THAT SUCH REQUISITIONED FEDERAL AGENCY MAY BE IN A POSITION TO SUPPLY OR EQUIPPED TO RENDER, AND PROVIDES FURTHER THAT IF SUCH WORK OR SERVICES CAN BE AS CONVENIENTLY OR MORE CHEAPLY PERFORMED BY PRIVATE AGENCIES, SUCH WORK SHALL BE LET BY COMPETITIVE BIDS TO SUCH PRIVATE AGENCIES. 7. THE JUDGE ADVOCATE GENERAL IS, THEREFORE, OF THE OPINION THAT THE SECRETARY OF THE NAVY MAY LEGALLY, UNDER THE ABOVE- MENTIONED ACT OF JUNE 30, 1932, PLACE AN ORDER WITH THE UNITED STATES MARITIME COMMISSION FOR THE THREE TANKERS, AUTHORITY FOR THE CONSTRUCTION OF WHICH IS CONTAINED IN THE ACTS OF JULY 30, 1937, AND MAY 17, 1938, SUPRA, AND FOR WHICH FUNDS WERE SPECIFICALLY MADE AVAILABLE IN THE NAVAL APPROPRIATION ACT, APPROVED APRIL 26, 1938, AND THE "SECOND DEFICIENCY APPROPRIATION ACT, FISCAL YEAR 1938," APPROVED JUNE 25, 1938.

W. B. WOODSON.

APPROVED AUG. 2. 1938:

CHARLES EDISON,

ACTING SECRETARY OF THE NAVY.

THE FACT THAT THIS OPINION IS QUOTED HEREIN FOR THE PURPOSES OF A COMPLETE RECORD IS NOT TO BE UNDERSTOOD AS AN APPROVAL OF THE BROAD CONCLUSIONS STATED IN PARAGRAPH 6 OF THE SAID OPINION AS TO THE OPERATION OR AUTHORITY CONFERRED BY THAT PART OF THE ECONOMY ACT DESIGNATED. THE PROVISION OF THE ECONOMY ACT UPON WHICH THESE BROAD CONCLUSIONS ARE BASED IS NOT UNDERSTOOD AS VESTING IN THE SERVICE RENDERING AGENCY ANY AUTHORITY WHICH IT DOES NOT HAVE INDEPENDENTLY OF SAID ROVISIONS; THAT IS TO SAY, SAID PROVISION IS NOT UNDERSTOOD AS VESTING ANY AUTHORITY IN THE MARITIME COMMISSION TO PURCHASE SUCH OIL TANKERS BUT ONLY PERMITS THE NAVY DEPARTMENT TO AVAIL ITSELF OF THE SERVICES OF THE MARITIME COMMISSION IF THAT COMMISSION HAS SUCH AUTHORITY INDEPENDENTLY OF THE CITED PROVISION IN THE ECONOMY ACT. THE CITED PROVISION IN THE ECONOMY ACT IS NOT UNDERSTOOD TO VEST IN THE MARITIME COMMISSION OR ANY OTHER AGENCY AUTHORITY TO ACT AS A GENERAL CONTRACTING OR PURCHASING AGENT FOR A DEPARTMENT HEAD; NEITHER IS IT UNDERSTOOD AS ANY AUTHORITY FOR RECOGNIZING THE STANDARD OIL CO. OF NEW JERSEY OR ANY OTHER PRIVATE AGENCY TO ACT AS A CONTRACTING AGENCY FOR THE SECRETARY OF THE NAVY WHETHER THROUGH THE MEDIUM OF THE MARITIME COMMISSION OR OTHERWISE.

THE COPY OF THE OPINION OF THE GENERAL COUNSEL OF THE MARITIME COMMISSION WHICH HAS BEEN FURNISHED TO THIS OFFICE IS AS FOLLOWS:

AUGUST 4, 1938. TO: UNITED STATES MARITIME COMMISSION. FROM: GENERAL COUNSEL. SUBJECT: PROPOSED ACQUISITION BY THE NAVY DEPARTMENT OF THREE

HIGH-SPEED TANKERS.

THE LETTER OF JULY 19, 1938, FROM THE CHAIRMAN OF THE COMMISSION TO HONORABLE R. N. ELLIOTT, ACTING COMPTROLLER GENERAL, A COPY OF WHICH IS ATTACHED, RELATES TO THE PROPOSAL THAT THE NAVY DEPARTMENT ACQUIRE, THROUGH THE COMMISSION, UPON THEIR COMPLETION, THREE HIGH-SPEED TANKERS PRESENTLY BEING CONSTRUCTED FOR THE STANDARD OIL COMPANY OF NEW JERSEY (REFERRED TO AS STANDARD OIL). THAT LETTER SETS FORTH IN DETAIL THE PROCEDURE TO BE FOLLOWED AND THE EFFECT OF THE PROPOSED TRANSACTIONS. WILL BE NOTED THAT THERE IS CONTEMPLATED THE FOLLOWING ACTION BY THE COMMISSION:

(A) EXECUTION OF AN AGREEMENT WITH STANDARD OIL AND OF A LETTER TO THE NAVY DEPARTMENT SUBSTANTIALLY IN THE RESPECTIVE FORMS ANNEXED TO SAID LETTER OF JULY 19, 1938;

(B) ACQUISITION OF EACH OF THE THREE TANKERS UPON THEIR COMPLETION AND PAYMENT TO STANDARD OIL AS CONSIDERATION THEREFOR OF AN AMOUNT REQUIRED TO REIMBURSE THAT COMPANY FOR THE COST TO IT OF THE CONSTRUCTION OF THE VESSELS SO ACQUIRED; AND

(C) TRANSFER OF EACH VESSEL FORTHWITH UPON HER ACQUISITION TO THE NAVY DEPARTMENT, THERE THEN BEING TRANSFERRED FROM THE NAVY DEPARTMENT APPROPRIATION AN AMOUNT EQUAL TO (I) THE COMMISSION'S PAYMENT TO STANDARD OIL AND (II) THE EXPENDITURES OF THE COMMISSION ON ACCOUNT OF THE NATIONAL DEFENSE FEATURES INCORPORATED IN THE VESSEL.

YOU HAVE REQUESTED THAT I SUBMIT TO YOU THIS MEMORANDUM OF MY OPINION (WHICH WAS ORALLY EXPRESSED AT THE TIME OF PREPARATION OF SAID LETTER OF JULY 19, 1938) AS TO THE AUTHORITY OF THE COMMISSION TO TAKE THE FOREGOING ACTION. I UNDERSTAND THAT THE JUDGE ADVOCATE GENERAL OF THE NAVY HAS GIVEN HIS OPINION THAT THE NAVY DEPARTMENT IS DULY AUTHORIZED TO TAKE THE ACTION WHICH WILL BE REQUIRED OF IT IN THE EVENT THAT THE PROPOSED TRANSACTIONS ARE TO BE CARRIED OUT.

THE QUESTION PRESENTED IS WHETHER OR NOT UPON THE PRECISE FACTS OF THE PRESENT CASE THE COMMISSION MAY EFFECT THE PROPOSED ACQUISITION AND TRANSFER OF THE THREE HIGH-SPEED TANKERS AS PART OF THE INTEGRATED TRANSACTION PRESCRIBED IN THE LETTER OF JULY 19, 1938. IN MY OPINION, THE ANSWER TO THAT QUESTION IS IN THE AFFIRMATIVE. THIS OPINION IS BASED UPON A CONSIDERATION OF THE EXPRESS PURPOSES OF THE MERCHANT MARINE ACT, 1936, AND THE POWERS CONFERRED UPON THE COMMISSION THEREUNDER, WITH PARTICULAR REFERENCE TO THE ACTION CONTEMPLATED AND THE PROMOTION THEREBY OF THE PURPOSES OF THE ACT AND THE INTERESTS OF THE GOVERNMENT.

ONE OF THE DECLARED POLICIES OF THE ACT IS TO FOSTER THE DEVELOPMENT AND ENCOURAGE THE MAINTENANCE OF A MERCHANT MARINE CAPABLE OF SERVING AS A NAVAL AND MILITARY AUXILIARY IN TIME OF WAR OR NATIONAL EMERGENCY. ONE OF THE ACTIVITIES AUTHORIZED UNDER THE ACT AND PARTICULARLY IN SECTIONS 504 AND 509 IS PROMOTING THE CONSTRUCTION OF HIGH-SPEED TANKERS SUITABLE FOR USE AS AUXILIARIES BY THE NAVY AND AIDING SUCH CONSTRUCTION BY CONTRIBUTING THE COST OF NATIONAL-DEFENSE FEATURES INCORPORATED THEREIN. THIS HAS BEEN DISCUSSED IN PREVIOUS OPINIONS OF THIS OFFICE AND ALSO IN AN OPINION OF THE COMPTROLLER GENERAL, DATED OCTOBER 26, 1937. BY SECTION 207 OF THE ACT OF THE COMMISSION IS AUTHORIZED TO ENTER INTO SUCH CONTRACTS UPON BEHALF OF THE UNITED STATES AS MAY IN ITS DISCRETION BE NECESSARY TO CARRY ON THE ACTIVITIES AUTHORIZED BY THE ACT, IN THE SAME MANNER THAT A PRIVATE CORPORATION MAY CONTRACT WITHIN THE SCOPE OF THE AUTHORITY CONFERRED BY ITS CHARTER.

IN ORDER TO CARRY ON THE AUTHORIZED ACTIVITY OF PROMOTING THE CONSTRUCTION OF HIGH-SPEED TANKERS IT APPEARS NECESSARY TO MAKE PRESENT FIRM ARRANGEMENTS FOR THE ACQUISITION OF THREE TANKERS, UPON COMPLETION, BY THE NAVY DEPARTMENT. THIS SITUATION EXISTS BECAUSE THE STANDARD OIL ALONE OF THE COMPANIES QUALIFIED APPEARS PRESENTLY WILLING AND ABLE TO CONSTRUCT (WITH THE COMMISSION PAYING FOR THE NATIONAL-DEFENSE FEATURES) ADDITIONAL HIGH-SPEED TANKERS. I UNDERSTAND, HOWEVER, THAT STANDARD OIL HAS STATED THAT IT WILL REQUIRE AS PART OF ITS LONG-RANGE CONSTRUCTION PROGRAM TWO ADDITIONAL HIGH SPEED TANKERS, IF, AND ONLY IF, ARRANGEMENTS ARE PRESENTLY MADE FOR DISPOSING OF THREE TANKERS, UPON THEIR COMPLETION, TO THE NAVY DEPARTMENT SUBSTANTIALLY AS SET FORTH IN SAID LETTER OF JULY 19, 1938.

ACCORDINGLY, UNDER SECTION 207 OF THE ACT, THE MAKING OF CONTRACTS BY THE COMMISSION TO BRING ABOUT THIS SITUATION IS AUTHORIZED UNLESS THE TAKING OF SUCH ACTION WOULD BE BARRED BY PROHIBITIONS ELSEWHERE IMPOSED. NO SUCH PROHIBITION EXISTS. THE PROPOSED ACTION BY THE COMMISSION IS PRINCIPALLY THAT OF A CONDUIT. THE COMMISSION WILL ACQUIRE THE TANKERS ONLY FOR THE PURPOSE OF IMMEDIATE TRANSFER TO THE NAVY DEPARTMENT; THE COMMISSION WILL RETAIN NO PROPERTY INTEREST IN THE TANKERS AFTER THEIR TRANSFER TO THE NAVY DEPARTMENT; THE COMMISSION'S APPROPRIATION WILL NOT BE DEPLETED BUT, ON THE CONTRARY, IT WILL RECEIVE FROM THE NAVY DEPARTMENT THE AMOUNT PREVIOUSLY EXPENDED BY THE COMMISSION IN PAYMENT FOR NATIONAL DEFENSE FEATURES.

I WISH TO EMPHASIZE AGAIN THAT THIS OPINION IS LIMITED TO THE SPECIFIC FACTS OF THIS PARTICULAR CASE. NO QUESTION IS HERE PRESENTED -- AND I EXPRESS NO OPINION--- AS TO WHAT POWER THE COMMISSION MIGHT HAVE ON A DIFFERENT STATE OF FACTS OR AS TO THE AUTHORITY OF THE COMMISSION TO TAKE ANY SINGLE STEP HERE CONTEMPLATED EXCEPT AS PART OF AN INTEGRATED TRANSACTION WHICH, IN MY OPINION, WILL PROMOTE THE PURPOSES OF THE ACT AND THE INTERESTS OF THE GOVERNMENT.

(S.) BON GEASLIN,

GENERAL COUNSEL.

IT IS TO BE UNDERSTOOD AS TO THIS OPINION ALSO THAT IT IS HEREIN FULLY SET FORTH IN ORDER THAT THE RECORD MAY REFLECT FAIRLY AND TRULY THE ADMINISTRATIVE VIEWPOINT AND NOT AS INDICATIVE OF AGREEMENT HERE WITH ALL OF THE CONCLUSIONS SUGGESTED IN THE OPINION AS TO THE MEANING OF THE STATUTES.

THE FORM OF THE AGREEMENT PROPOSED AS BETWEEN THE MARITIME COMMISSION AND THE NAVY DEPARTMENT, OF WHICH A COPY HAS BEEN FURNISHED TO THIS OFFICE, INCLUDES A STATEMENT OF FACTS AS FOLLOWS:

REPRESENTATIVES OF THE NAVY DEPARTMENT AND OF THE COMMISSION HAVE BEEN IN FREQUENT CONVERSATION WITH RESPECT TO THE TWELVE HIGH-SPEED TANKERS INCORPORATING NATIONAL-DEFENSE FEATURES WHICH ARE BEING CONSTRUCTED FOR THE STANDARD OIL COMPANY OF NEW JERSEY UNDER CONTRACTS DATED JANUARY 3, 1938. BY AGREEMENTS OF THE SAME DATE, THE COMMISSION AGREED TO PAY FOR THE NATIONAL DEFENSE FEATURES.

BY LETTER FROM ADMIRAL LEAHY DATED JANUARY 17, 1938, WE WERE INFORMED THAT THE NAVY DEPARTMENT DESIRES TO TAKE OVER ONE OF THESE VESSELS. HAVE RECENTLY BEEN ADVISED THAT THE NAVY DEPARTMENT NOW DESIRES TO ACQUIRE, UPON COMPLETION, A TANKER BEING CONSTRUCTED BY SUN SHIPBUILDING AND DRY DOCK COMPANY, HULL NUMBER 172, AND TWO TANKERS BEING CONSTRUCTED BY FEDERAL SHIPBUILDING AND DRY DOCK COMPANY, HULL NUMBERS 152 AND 153.

THE COMMISSION HAS ARRANGED TO ACQUIRE THESE THREE TANKERS UPON THEIR COMPLETION. * * *

A COPY ALSO HAS BEEN FURNISHED TO THIS OFFICE OF A LETTER DATED AUGUST 10, 1938, SUGGESTING MODIFICATION OF EARLIER ARRANGEMENTS AS FOLLOWS: R. L. HAGUE,

VICE PRESIDENT.

STANDARD OIL COMPANY OF NEW JERSEY,

30 ROCKEFELLER PLAZA,

NEW YORK, AUGUST 10, 1938.

A1 ADMIRAL E. S. LAND,

UNITED STATES MARITIME COMMISSION,

WASHINGTON, D.C.

DEAR ADMIRAL LAND: IF THE UNITED STATES MARITIME COMMISSION SHOULD NOW ENTER INTO AN AGREEMENT WITH OUR COMPANY TO PURCHASE AND ACQUIRE TITLE TO THREE OF THE NATIONAL-DEFENSE FEATURED OIL TANKERS ON COMPLETION, AS OUTLINED IN THE COMMISSION'S LETTER OF JULY 19 TO THE ACTING COMPTROLLER GENERAL OF THE UNITED STATES, IT WOULD BE THE PRESENT PURPOSE OF OUR COMPANY TO PLACE ORDERS FOR THREE ADDITIONAL SIMILAR NATIONAL-DEFENSE FEATURED HIGH-SPEED TANKERS AS SOON AS CONDITIONS WARRANT, PROVIDED, OF COURSE, THAT THE COMMISSION WOULD AGREE TO CONTRIBUTE THE COST OF THE NATIONAL-DEFENSE FEATURES, SUBSTANTIALLY AS WITH THE TANKERS NOW UNDER CONSTRUCTION.

YOURS VERY TRULY,

STANDARD OIL COMPANY OF NEW JERSEY,

BY (SIGNED) ROBERT L. HAGUE, VICE PRESIDENT.

THE LETTER FROM THE MARITIME COMMISSION OF JULY 19, 1938, ORIGINALLY SUBMITTING THE MATTER FOR DECISION HERE AS TO THE AVAILABILITY OF APPROPRIATIONS, IN PERTINENT PART, IS AS FOLLOWS:

REFERENCE IS MADE (A) TO YOUR LETTER OF OCTOBER 26, 1937, IN REPLY TO OUR INQUIRY RECEIVED BY YOU ON OCTOBER 19, 1937, WITH RESPECT TO ARRANGEMENTS THEN PROPOSED FOR THE CONSTRUCTION OF HIGH-SPEED TANKERS AND THE PAYMENT OF THE COST OF NATIONAL-DEFENSE FEATURES TO BE INCORPORATED THEREIN, AND (B) TO THE AGREEMENTS DATED JANUARY 3, 1938, BETWEEN STANDARD OIL COMPANY OF NEW JERSEY (HEREIN SOMETIMES CALLED STANDARD OIL) AND CERTAIN SHIPBUILDING COMPANIES, AND BETWEEN THE COMMISSION AND STANDARD OIL PROVIDING, RESPECTIVELY, FOR THE CONSTRUCTION OF A TOTAL OF TWELVE SUCH HIGH-SPEED TANKERS AND THE PAYMENT BY THE COMMISSION OF THE COST OF SUCH NATIONAL-DEFENSE FEATURES. COPIES OF FORMS OF THESE AGREEMENTS ARE ANNEXED HERETO FOR CONVENIENT REFERENCE.

AT THE TIME OF EXECUTION OF SAID AGREEMENTS (WHICH WERE AWARDED, AFTER COMPETITIVE BIDDING, WITH THE APPROVAL OF THE COMMISSION) IT WAS CONTEMPLATED THAT THE NAVY DEPARTMENT WOULD DESIRE TO ACQUIRE, UPON COMPLETION, AT LEAST ONE OF THE TANKERS, CONSTRUCTION OF "ONE OILER OF ABOUT EIGHT THOUSAND TONS" HAVING THERETOFORE BEEN AUTHORIZED (PUBLIC, NO. 226, APPROVED JULY 30, 1937) (50 STAT. 544). PURSUANT TO ACT APPROVED MAY 17, 1938 (PUBLIC, NO. 528) (52 STAT. 401, 402), AUTHORITY WAS GIVEN "TO ACQUIRE AND CONVERT OR TO UNDERTAKE THE CONSTRUCTION OF * * * (F) FOUR OIL TANKERS, A TOTAL OF THIRTY-TWO THOUSAND TONS LIGHT DISPLACEMENT TONNAGE.'

STANDARD OIL STATES THAT IT IS WILLING TO TRANSFER TO THE GOVERNMENT UPON COMPLETION, A TANKER BEING CONSTRUCTED BY SUN SHIPBUILDING AND DRY DOCK COMPANY, HULL NUMBER 172, AND TWO TANKERS BEING CONSTRUCTED BY FEDERAL SHIPBUILDING AND DRY DOCK COMPANY, HULL NUMBERS 152 AND 153, THESE BEING THE FIRST, FOURTH, AND FIFTH TANKERS TO BE COMPLETED ACCORDING TO THE PRESENT CONSTRUCTION SCHEDULE. (THE SECOND AND THIRD TANKERS TO BE COMPLETED ARE TO BE ACQUIRED BY ANOTHER OPERATOR AND HENCE ARE NOT AVAILABLE FOR TRANSFER TO THE NAVY DEPARTMENT.) STANDARD OIL HAS FURTHER ADVISED THAT, IN THE EVENT FIRM AGREEMENTS FOR SUCH TRANSFERS ARE MADE AT THIS TIME, IT WILL, AT AN OPPORTUNE TIME, CONSIDER WITH THE COMMISSION THE CONSTRUCTION, UNDER CONDITIONS (EXCEPT POSSIBLY AS TO COSTS) SUBSTANTIALLY SIMILAR TO THOSE SET FORTH IN THE AGREEMENT BETWEEN THE COMMISSION AND STANDARD OIL DATED JANUARY 3, 1938, OF TWO (THREE, AS PER STANDARD OIL CO. LETTER OF AUGUST 10, 1938, SUPRA) ADDITIONAL NATIONAL-DEFENSE FEATURED HIGH-SPEED TANKERS. THE COMMISSION IS INFORMED BY THE NAVY DEPARTMENT AND IS OF OPINION THAT CONSTRUCTION OF TWO ADDITIONAL HIGH-SPEED TANKERS IS DESIRABLE FOR THE NATIONAL DEFENSE AND THE DEVELOPMENT OF THE FOREIGN AND DOMESTIC COMMERCE OF THE UNITED STATES. ACCORDINGLY, THE EFFORT TO OBTAIN THIS ADDITIONAL CONSTRUCTION IS DEEMED BY THE COMMISSION TO BE ONE OF THE ACTIVITIES AUTHORIZED BY THE MERCHANT MARINE ACT, 1936 (HEREIN SOMETIMES CALLED THE ACT), AND IN ORDER TO PROMOTE SUCH ACTIVITY THE COMMISSION DEEMS IT NECESSARY TO ENTER INTO THE ARRANGEMENTS HEREINAFTER OUTLINED. THE COMMISSION DESIRES TO TAKE THE ACTION INDICATED BECAUSE OF ITS BELIEF THAT IN SO DOING IT WILL PROMOTE THE INTERESTS OF THE GOVERNMENT AND FORWARD THE ACCOMPLISHMENT OF ONE OF THE MAJOR PURPOSES OF THE ACT--- THAT IS, THE DEVELOPMENT OF THE NATIONAL DEFENSE. IT WILL BE NOTED THAT UNDER THE ARRANGEMENTS HEREINAFTER OUTLINED THE COMMISSION'S APPROPRIATION WILL NOT BE DECREASED BY THE PROPOSED ACQUISITION OF THE TANKERS FROM STANDARD OIL BUT THAT ON THE CONTRARY THE AMOUNT PAID FOR NATIONAL-DEFENSE FEATURES OF THE THREE TANKERS ACQUIRED WILL BE RETURNED TO THE COMMISSION.

THE SUGGESTED PROCEDURE IS AS FOLLOWS:

1. THE THREE TANKERS DESIGNATED WILL BE COMPLETED UNDER THE PRESENT CONTRACTS. STANDARD OIL WILL CONTINUE TO SUPERVISE THE CONSTRUCTION AND, UPON COMPLETION, DELIVERY OF THE TANKERS WILL BE ACCEPTED BY STANDARD OIL FROM THE SHIPYARD.

2. THEREUPON, THESE TANKERS WILL BE TRANSFERRED BY STANDARD OIL TO THE COMMISSION AND REIMBURSEMENT WILL BE MADE BY THE COMMISSION TO STANDARD OIL OF THE COST TO STANDARD OIL OF THE CONSTRUCTION OF THE TANKERS. STANDARD OIL SHALL MAKE NO PROFIT FROM THE TRANSACTION, THE PAYMENTS TO IT TO COMPRISE ONLY (A) THE AMOUNT OF THE CONTRIBUTION BY STANDARD OIL TO THE CONSTRUCTION COST OF THE TANKERS (THIS EXCLUDING THE COST OF NATIONAL- DEFENSE FEATURES) AND (B) REASONABLE COSTS INCURRED BY STANDARD OIL IN CONNECTION WITH SUCH CONSTRUCTION. IT WILL BE NOTED THAT THE TANKERS ARE NOT PROPOSED TO BE ACQUIRED UNDER SECTION 30 OF THE JANUARY 3, 1938, CONTRACTS. THE PRESENT PROPOSAL IS BELIEVED TO BE MORE ADVANTAGEOUS TO THE GOVERNMENT, AND MAKES POSSIBLE A DEFINITE FIXING AT THIS TIME OF THE COST OF ACQUISITION.

3. IMMEDIATELY UPON THEIR ACQUISITION THE TANKERS WILL BE TRANSFERRED BY THE COMMISSION TO THE NAVY DEPARTMENT AGAINST THE TRANSFER OF APPROPRIATIONS IN AN AMOUNT EQUAL TO (A) THE COST TO THE COMMISSION OF THE ACQUISITION OF THE TANKERS PURSUANT TO THE FOREGOING CLAUSE 2, AND (B) THE PAYMENTS THERETOFORE MADE BY THE COMMISSION TO THE COST OF THE NATIONAL- DEFENSE FEATURES INCORPORATED IN THESE THREE TANKERS.

COPIES OF FORMS OF A PROPOSED LETTER FROM THE COMMISSION TO THE NAVY DEPARTMENT AND OF A PROPOSED AGREEMENT BETWEEN THE COMMISSION AND STANDARD OIL WITH RESPECT TO THESE TRANSACTIONS ARE SUBMITTED HEREWITH.

THE NET EFFECT OF THESE PROPOSED TRANSACTIONS WOULD BE THAT:

1. THE NAVY DEPARTMENT WILL ACQUIRE THREE HIGH-SPEED TANKERS SUITABLE FOR CONVERSION AND USE AS AUXILIARIES, SATISFACTORY TO THE NAVY DEPARTMENT AND CONSTRUCTED TO PLANS AND SPECIFICATIONS HERETOFORE APPROVED BY THAT DEPARTMENT. IN STATEMENTS SUBMITTED TO CONGRESS BY THE NAVY DEPARTMENT, THE ESTIMATED COST OF CONSTRUCTION OF A SINGLE HIGH-SPEED OILER DESIGNED AS A FLEET AUXILIARY WAS BETWEEN $8,500,000 AND $9,000,000. SUCH AN OILER DIFFERS IN MANY RESPECTS FROM THE TANKERS TO BE CONSTRUCTED FOR STANDARD OIL FOR APPROXIMATELY $3,129,667 PER VESSEL, BUT ALLOWING FOR SUCH DIFFERENCES AND EXPENDITURES WHICH WILL BE REQUIRED IN THE EVENT OF THEIR ACQUISITION BY THE NAVY DEPARTMENT. IT IS AGREED THAT THE SAVING THROUGH THE PROCEDURE ABOVE OUTLINED WILL STILL BE VERY SUBSTANTIAL.

2. FOR AN ADDITIONAL OUTLAY BY THE GOVERNMENT OF APPROXIMATELY $2,249,417 PER TANKER (PLUS REASONABLE COSTS INCURRED BY STANDARD OIL IN CONNECTION WITH THE CONSTRUCTION), THE GOVERNMENT WILL OBTAIN FULL TITLE TO VESSELS NEEDED BY THE NAVY DEPARTMENT IN WHICH THE GOVERNMENT WILL, UPON COMPLETION, HAVE AN INVESTMENT OF APPROXIMATELY $880,250 (SIC), BUT NO PROPERTY INTEREST OTHER THAN THE RIGHT OF REQUISITION OR (ONLY SO LONGAS THE VESSEL IS OWNED BY STANDARD OIL) OF PURCHASE UNDER ARTICLE 30 OF THE APPLICABLE AGREEMENT OF JANUARY 3, 1938.

3. DELIVERY WOULD BE OBTAINED BY THE NAVY DEPARTMENT FAR IN ADVANCE OF ANY POSSIBLE DELIVERY WHICH COULD BE OBTAINED IF THE NAVY DEPARTMENT WERE COMPELLED PRESENTLY TO ARRANGE FOR THE CONSTRUCTION OF THE TANKERS. THE URGENT NEED OF THE NAVY DEPARTMENT FOR HIGH-SPEED TANKERS AT THE EARLIEST POSSIBLE MOMENT MAKES THIS ADVANTAGE EXTREMELY IMPORTANT. IT IS CONTEMPLATED THAT IF THE ARRANGEMENTS NOW PROPOSED ARE APPROVED, THE NAVY DEPARTMENT CAN ACQUIRE ALL THREE TANKERS DURING THE CALENDAR YEAR 1939 AND EARLY 1940. IN VIEW OF THE PRESENT PROGRESS OF SUCH CONSTRUCTION, IT WOULD BE IMPOSSIBLE TO APPROACH THE SCHEDULE FOR NEW CONSTRUCTION TO BE INITIATED BY THE NAVY DEPARTMENT AT THE PRESENT TIME. A CONSIDERABLE DELAY COULD BE ANTICIPATED, ESPECIALLY SINCE THE SHIPYARDS BELIEVED TO BE BEST EQUIPPED TO CONSTRUCT THIS TYPE OF TANKER ARE PRESENTLY ENGAGED IN THE CONSTRUCTION OF THE TWELVE STANDARD OIL HIGH-SPEED TANKERS.

4. THE COMMISSION WOULD BE REIMBURSED BY TRANSFER FROM THE APPROPRIATION OF THE NAVY DEPARTMENT FOR ITS CONTRIBUTION TO THE NATIONAL-DEFENSE FEATURES INCORPORATED IN THE THREE TANKERS.

5. IF THE CONSTRUCTION OF TWO ADDITIONAL HIGH-SPEED TANKERS WAS HEREAFTER ARRANGED BY THE COMMISSION AND STANDARD OIL, THE AGGREGATE OF FOURTEEN TANKERS WOULD STILL BE AT LEAST SIX BELOW THE MINIMUM NUMBER THAT THE NAVY DESIRES TO HAVE IN THE FLEET OR AVAILABLE FOR REQUISITION IN TIME OF EMERGENCY.

COMPLETION AS SOON AS POSSIBLE OF THE ARRANGEMENTS ABOVE INDICATED IS DESIRED BY THE PARTIES CONCERNED (A) BY THE NAVY DEPARTMENT BECAUSE ACQUISITION OF HIGH-SPEED TANKERS AT THE EARLIEST POSSIBLE MOMENT, TO BE INCLUDED IN THE FLEET, IS DEEMED ESSENTIAL IN THE INTEREST OF NATIONAL DEFENSE; AND (B) BY THE COMMISSION BECAUSE OF ITS DESIRE TO EFFECT THE ABOVE DESCRIBED TRANSFER AND OBTAIN, IF AND WHEN POSSIBLE, THE CONSTRUCTION OF THE ADDITIONAL VESSELS WHICH IT DEEMS NECESSARY FOR THE NATIONAL DEFENSE AND THE DEVELOPMENT OF FOREIGN AND DOMESTIC COMMERCE OF THE UNITED STATES.

STANDARD OIL AND THE NAVY DEPARTMENT AGREE WITH THE COMMISSION, HOWEVER, THAT FURTHER ACTION IN CARRYING OUT THE PROCEDURE ABOVE OUTLINED MUST AWAIT YOUR ANSWER AS TO WHETHER YOUR OFFICE WOULD OBJECT TO THE PAYMENT AND TRANSFER OF FUNDS REQUIRED TO BE MADE PURSUANT THERETO.

SINCERELY YOURS,

(SIGNED) E. S. LAND, CHAIRMAN.

IT APPEARS THAT ON APRIL 19, 1937, SENATOR WALSH INTRODUCED THE BILL (S. 2193), LATER ENACTED AS PUBLIC, NO. 226, ACT OF JULY 30, 1937, 50 STAT. 544,"TO AUTHORIZE THE CONSTRUCTION OF CERTAIN AUXILIARY VESSELS FOR THE NAVY" INCLUDING "/F) ONE OILER OF ABOUT EIGHT THOUSAND TONS.' THIS BILL WAS REFERRED TO THE SENATE COMMITTEE ON NAVAL AFFAIRS WHICH REPORTED FAVORABLY THEREON WITHOUT AMENDMENT, BY SENATE REPORT NO. 614 OF MAY 26, 1937, ON S. 2193, IN PERTINENT PART AS FOLLOWS:

THE PURPOSE OF THE BILL IS TO AUTHORIZE THE PRESIDENT TO PROCEED WITH THE CONSTRUCTION OF SIX AUXILIARY VESSELS FOR THE NAVY IN ORDER TO FURNISH OR REPLACE IN PART VESSELS OF THAT TYPE WHICH ARE URGENTLY NEEDED FOR THE PROPER MAINTENANCE AND OPERATION OF A TREATY NAVY.

THE BILL WAS INTRODUCED AT THE REQUEST OF THE NAVY DEPARTMENT. * * *

AUXILIARIES MAY BE DIVIDED INTO TWO BROAD CLASSES--- TENDERS AND OTHER AUXILIARIES.

THE OTHER TYPES OF AUXILIARIES, OILERS, STORE SHIPS, CARGO SHIPS, MINESWEEPERS, ETC., WILL BE REQUIRED IN LARGE NUMBERS IN TIME OF WAR, IN NUMBERS TOO GREAT TO BE BUILT OR OPERATED BY THE NAVY IN TIME OF PEACE. THEREFORE, THE NUMBERS THAT SHOULD BE OPERATED IN TIME OF PEACE SHOULD BE ONLY SUFFICIENT TO FULFILL THE PEACETIME REQUIREMENTS OF MAINTAINING AND OPERATING THE FLEET. THEIR CONSTRUCTION WILL GIVE US EXPERIENCE IN DEVELOPING THE TYPE OF VESSEL THAT WOULD BE NEEDED FOR QUANTITY PRODUCTION IN TIME OF WAR, AND ALSO GIVE US DATA UPON WHICH TO BASE CONVERSION PLANS OF MERCHANT SHIPS TAKEN OVER IN AN EMERGENCY.

NEARLY ALL OF THE PRESENT AUXILIARY VESSELS ARE OLD AND ARE NEARING THE END OF THEIR USEFUL LIFE. * * * AS THE SPEED OF NEARLY ALL OF THE PRESENT AUXILIARY SHIPS IS SLOW THE COMBATANT SHIPS HAVE TO ACCOMMODATE THEIR SPEED TO THAT OF THE SLOW AUXILIARIES AND THUS EXPOSE THEMSELVES TO SUBMARINE ATTACK. THE EXPERIENCE OF THE WORLD WAR DEMONSTRATED THAT THE HIGHER THE SPEED OF A SHIP THE LESS HER CHANCES OF BEING SUNK BY A SUBMARINE.

THE COMMITTEE WAS INFORMED THAT APPROXIMATELY 48 NEW AUXILIARY VESSELS WILL BE REQUIRED OVER A PERIOD OF 10 YEARS, AND THAT ADDITIONAL AUTHORIZING ACTS WILL PROBABLY BE REQUESTED FROM YEAR TO YEAR. THE PRESENT BILL IS THEREFORE NOT A COMPLETE PROGRAM COVERING ALL THE NEEDS OF THE NAVY FOR AUXILIARY VESSELS. IT MERELY AUTHORIZES THE CONSTRUCTION THAT MAY BE LAID DOWN IN 1 YEAR.

THE NEED FOR EACH VESSEL AUTHORIZED IN THE BILL IS AS FOLLOWS:

OILERS

THE PRIMARY SERVICE OF OILERS IS TO TRANSPORT ALL KINDS OF FUEL AND OIL FOR THE USE OF THE FLEET. NAVY OILERS CARRY NOT ONLY FUEL OIL FOR THE BOILERS OF THE SHIPS OF THE FLEET, BUT THEY ALSO CARRY DIESEL OIL FOR SUBMARINES, LUBRICATING OILS FOR MACHINERY, GASOLINE FOR AIRPLANES, AND GASOLINE FOR SHIPS' BOATS. THEY DIFFER IN THIS RESPECT FROM MERCHANT OILERS WHICH USUALLY CARRY ONLY ONE KIND OF FUEL. THEY SHOULD HAVE SPEED IN ORDER THAT THEY CAN ACCOMPANY THE FLEET AND REFUEL IT IMMEDIATELY AFTER ARRIVAL AT ITS DESTINATION. NAVY OILERS ALSO MUST BE FITTED WITH THE NECESSARY GEAR FOR REFUELING SMALL VESSELS AT SEA. THIS REQUIRES PUMPS THAT CAN DISCHARGE AT A RAPID RATE. MERCHANT OILERS DO NOT HAVE SUCH GEAR FOR REFUELING VESSELS AT SEA, AND AS A RULE DO NOT HAVE PUMPS OF THE REQUIRED CAPACITY BECAUSE THEY USUALLY DEPEND UPON PUMPING SYSTEMS ASHORE TO LOAD AND DISCHARGE THEM QUICKLY. THESE REQUIREMENTS FOR NAVY OILERS ARE IN ADDITION TO THEIR GUNS, AMMUNITION, AND OTHER STRICTLY MILITARY FEATURES.

THIS VESSEL IS A REPLACEMENT FOR THE MAUMEE. SHE WILL HAVE A DISPLACEMENT OF ABOUT 8,000 TONS AND A SPEED OF 16 1/2 KNOTS.

THE COMMITTEE IS OF THE OPINION THAT THE AUXILIARY VESSELS REQUIRED FOR THE PEACETIME OPERATION AND MAINTENANCE OF THE FLEET SHOULD BE CONSTRUCTED AND THAT THE MARITIME COMMISSION SHOULD ASSIST PRIVATE OWNERS IN BUILDING FAST VESSELS THAT MIGHT BE USED AS OTHERS, CARGO SHIPS, AND TRANSPORTS, IN TIME OF WAR.

HOUSE REPORT NO. 1072 OF JUNE 22, 1937, ON THIS SAME BILL CONTAINS FURTHER PERTINENT EXPLANATION AS FOLLOWS:

OILER

THIS IS A REPLACEMENT VESSEL. IT WILL HAVE A DISPLACEMENT OF ABOUT 8,000 TONS AND A SPEED OF 16 1/2 KNOTS WITH AN ESTIMATED COST OF $8,496,800.

IT WILL BE NOTED THAT THE ESTIMATED COST OF THESE SIX VESSELS TOTAL $48,206,050.

THE COMMITTEE IS CONFIDENT THAT THE NAVY DEPARTMENT WILL EXERT EVERY EFFORT TO KEEP THE COSTS DOWN TO OR BELOW THIS ESTIMATED AMOUNT. HOWEVER, DUE TO THE CONDITIONS NOW EXISTING IN THE LABOR AND MATERIAL MARKETS THE INDICATIONS ARE THAT COSTS WILL RISE RATHER THAN REMAIN STEADY OR DECLINE. WITH INCREASES IN THESE COSTS IT WILL SERIOUSLY DELAY CONSTRUCTION IF THE NAVY SHOULD HAVE TO COME TO CONGRESS FOR AN INCREASE IN THE AUTHORIZED COSTS AFTER THE CONSTRUCTION OF THE VESSELS HAS ONE STARTED. FOR THIS REASON THE COMMITTEE RECOMMENDS THAT THE AUTHORIZED LIMIT OF COST OF ALL THE VESSELS AUTHORIZED HEREIN BE PLACED AT $50,000,000 ALLOWING A LEEWAY OF $1,793,950 OVER THE ESTIMATED COST COMPUTED UNDER PRESENT-DAY LABOR AND MATERIAL COSTS.

THIS BILL AS ENACTED JULY 30, 1937, 50 STAT. 544, IS, IN PERTINENT PART, AS FOLLOWS:

THAT FOR THE PURPOSE OF FURNISHING OR REPLACING AUXILIARY VESSELS URGENTLY NECESSARY FOR THE PROPER MAINTENANCE AND OPERATION OF THE NAVY, THE PRESIDENT OF THE UNITED STATES IS HEREBY AUTHORIZED TO UNDERTAKE THE CONSTRUCTION OF ABOUT THIRTY-SIX THOUSAND AND FIFTY TONS (LIGHT DISPLACEMENT TONNAGE) OF SUCH AUXILIARY VESSELS AS FOLLOWS AT A TOTAL COST FOR ALL VESSELS OF NOT MORE THAN $50,000,000:

(F) ONE OILER OF ABOUT EIGHT THOUSAND TONS.

SEC. 2. NOT LESS THAN 50 PERCENTUM OF THE VESSELS HEREIN AUTHORIZED,ALLOCATED ON AN PROXIMATE TONNAGE BASIS, INCLUDING SUCH PORTIONS THEREOF AS ARE CUSTOMARILY MANUFACTURED IN GOVERNMENT PLANTS, SHALL BE CONSTRUCTED OR MANUFACTURED IN GOVERNMENT NAVY YARDS, NAVAL STATIONS, NAVAL GUN FACTORIES, NAVAL ORDNANCE PLANTS, OR ARSENALS OF THE UNITED STATES: PROVIDED, THAT THE PRESIDENT MAY, HOWEVER, SHOULD THE PUBLIC INTERESTS IN HIS JUDGMENT SO REQUIRE, HAVE THE VESSELS BUILT IN GOVERNMENT OR PRIVATE YARDS NOTWITHSTANDING THE ALLOCATION OTHERWISE IMPOSED: * * *

SEC. 3. ANY BID FOR THE CONSTRUCTION ON THE PACIFIC COAST OF ANY OF THE VESSELS AUTHORIZED BY THIS ACT SHALL HAVE A DIFFERENTIAL OF 6 PERCENTUM IN ITS FAVOR WHICH SHALL BE CONSIDERED BY THE SECRETARY OF THE NAVY IN AWARDING CONTRACTS FOR THE CONSTRUCTION OF SAID VESSELS. IT DOES NOT APPEAR THAT THE CONSTRUCTION OF THIS OILER HAS BEEN UNDERTAKEN.

ON DECEMBER 8, 1937, HON. CHARLES EDISON, ASSISTANT SECRETARY OF THE NAVY, TESTIFYING (HOUSE HEARINGS, PP. 1-2) IN SUPPORT OF THE NAVY DEPARTMENT APPROPRIATION BILL, STATED AS FOLLOWS:

DURING THE COURSE OF THE YEAR, I HAVE HAD OCCASION TO INSPECT THE FLEET AND THE SHORE STATIONS OF THE NAVY. THE FLEET IS IN A HIGH STATE OF EFFICIENCY AS REGARDS MORALE AND TRAINING. THE SHIPBUILDING PROGRAM IS PROCEEDING AS RAPIDLY AS PRACTICABLE. THE INCREMENT OF 22 VESSELS, INCLUDING TWO BATTLESHIPS, REQUESTED FOR COMMENCEMENT IN 1939 IS AMPLY JUSTIFIED BY THE PRESENT UNSETTLED WORLD CONDITIONS. THE START THAT HAS BEEN MADE IN THE REPLACEMENT OF VESSELS OF THE AUXILIARY CLASS SHOULD BE CONTINUED, AS THERE NOW EXISTS A DEFICIENCY IN NUMBERS, AND MOST OF THE AUXILIARIES ARE DEFICIENT IN SPEED, OBSOLETE IN DESIGN, AND ARE DETERIORATING DUE TO AGE.

EVERY EFFORT IS BEING MADE TO EXPEDITE THE NAVAL SHIPBUILDING PROGRAM.

AT PAGE 17 OF THE SAID HEARINGS ON THE 1939 NAVY APPROPRIATION BILL ONE OILER IS INCLUDED AMONG THE VESSELS TABULATED "ON WHICH EXPENDITURES WILL BE MADE IN 1939.' AT PAGES 44-45 OF SAID HEARINGS, ADMIRAL LEAHY, CHIEF OF NAVAL OPERATIONS, STATED:

THERE ARE NOW BUILDING OR APPROPRIATED FOR 72 VESSELS WHOSE CONSTRUCTION HAS BEEN PROVIDED FOR IN PART BY PREVIOUS APPROPRIATIONS UNDER "REPLACEMENT OF NAVAL VESSELS," OR BY ALLOCATIONS FROM EMERGENCY FUNDS. CONSTRUCTION FUNDS ASKED FOR IN THESE ESTIMATES ARE FOR THE PURPOSE OF COMPLETING OR CONTINUING CONSTRUCTION UPON SUCH OF THOSE VESSELS AS WILL NOT BE COMPLETED DURING THE PRESENT FISCAL YEAR, AND TO BEGIN CONSTRUCTION DURING THE FISCAL YEAR 1939 OF TWO BATTLESHIPS, TWO LIGHT CRUISERS, EIGHT DESTROYERS, AND SIX SUBMARINES. THESE ARE ALL REPLACEMENT VESSELS FOR OVER-AGE COMBATANT SHIPS. THE ESTIMATES ALSO REQUEST FUNDS FOR THE CONSTRUCTION OF FOUR AUXILIARY VESSELS--- ONE SUBMARINE TENDER, ONE OILER, AND MINE SWEEPER, AND ONE FLEET TUG-- IN ACCORDANCE WITH LEGISLATION ALREADY ENACTED, WHICH AUTHORIZES REPLACEMENT OF OLD AUXILIARIES WITH MODERN, MORE EFFICIENT VESSELS OF THE SAME TYPES.

IT IS DESIRED TO EMPHASIZE THE FACT THAT THE PRESENT ESTIMATES ARE BASED ON A NAVY OF COMBATANT SHIPS OF THE NUMBERS AND TYPES AUTHORIZED BY THE VINSON-TRAMMELL ACT OF MARCH 27, 1934, AND DO NOT CONTEMPLATE ANY INCREASE BEYOND THE SO-CALLED TREATY NAVY.

THE NAVY APPROPRIATION ACT OF 1939 OF APRIL 26, 1938, 52 STAT. 223, 242, UNDER REPLACEMENT OF NAVAL VESSELS, ETC., MAKES AN APPROPRIATION WITH PERTINENT RESTRICTIONS AS FOLLOWS:

ON ACCOUNT OF HULLS AND OUTFITS OF VESSELS AND MACHINERY OF VESSELS HERETOFORE AUTHORIZED (AND APPROPRIATED FOR IN PART), AND FOR THE COMMENCEMENT OF THE FOLLOWING VESSELS AUTHORIZED BY THE ACT APPROVED MARCH 27, 1934 (48 STAT. 503-505), TWO BATTLESHIPS, TWO CRUISERS OF SUBCATEGORY (B), EIGHT DESTROYERS, AND SIX SUBMARINES, AND FOR THE COMMENCEMENT OF THE FOLLOWING VESSELS AUTHORIZED BY THE ACT APPROVED JULY 30, 1937 (50 STAT. 544-545), ONE MINE SWEEPER, ONE SUBMARINE TENDER, ONE FLEET TUG, AND ONE OILER, $117,363,150, TO REMAIN AVAILABLE UNTIL EXPENDED. * * *

IN THE MEANTIME, BY ITS LETTER OF OCTOBER 19, 1937, THE UNITED STATES MARITIME COMMISSION REQUESTED DECISION OF THIS OFFICE AS TO WHETHER PAYMENT UNDER ITS APPROPRIATION WAS AUTHORIZED FOR NATIONAL DEFENSE FEATURES OF EXTRA SPEED, FINER HULL CONSTRUCTION, GUN FOUNDATIONS, MAGAZINE AND EQUIPMENT SPACES, ETC., IF THE COMMISSION SHOULD ENTERTAIN FAVORABLY A PROPOSAL FROM THE STANDARD OIL CO. OF NEW JERSEY--- OR FROM ANY OTHER PARTY OR PARTIES SIMILARLY DISPOSED--- TO FINANCE PRIVATELY THE CONSTRUCTION OF CERTAIN OIL TANKERS TO BE ENGAGED SOLELY IN THE DOMESTIC TRADE UNDER AN ARRANGEMENT FOR EMBODYING THE SAID NATIONAL-DEFENSE FEATURES IN THEIR BASIC CONSTRUCTION AND SATISFYING THE NAVY DEPARTMENT AND THE COMMISSION OF THE READY CONVERTIBILITY OF SUCH TANKERS INTO NAVAL AUXILIARY OIL TANKERS IN THE EVENT OF A NATIONAL EMERGENCY.

SECTION 509 OF THE MERCHANT MARINE ACT AUTHORIZED THE COMMISSION TO GRANT AID TO CONSTRUCT A NEW VESSEL TO BE OPERATED IN DOMESTIC TRADE WHICH THE APPLICANT MIGHT PURCHASE UNDER SECTION 502 OF THE ACT, THE COMMISSION TO PAY THE COST RESULTING FROM INSTALLATION OF NATIONAL DEFENSE FEATURES, BUT THERE WAS NO SPECIFIC PROVISION FOR PAYMENT FROM THE COMMISSION APPROPRIATION OF THE COST OF THE NATIONAL-DEFENSE FEATURES WHERE THE CONSTRUCTION WAS TO BE PRIVATELY FINANCE PURSUANT TO APPLICATION UNDER SECTION 504 OF THE ACT.

IT APPEARS THIS QUESTION FIRST AROSE IN CONNECTION WITH AN APPLICATION OF ROBERT W. MALONE WHO PROPOSED TO PRIVATELY FINANCE TWO TANKERS TO ENGAGE IN THE DOMESTIC TRADE IF THE COMMISSION WOULD ASSUME THE EXCESS BUILDING COST TO THE EXTENT OF $300,000 PER VESSEL FOR THE NATIONAL-DEFENSE FEATURES, INCLUDING AN INCREASE IN SPEED FROM 11 TO 16 KNOTS PER HOUR. THE THEN ACTING GENERAL COUNSEL FOR THE COMMISSION, MR. GOLDEN W. BELL--- MORE RECENTLY ASSISTANT SOLICITOR GENERAL OF THE UNITED STATES--- IN A CAREFULLY REASONED OPINION OF DECEMBER 11, 1936, TO THE COMMISSION REACHED THE CONCLUSION THE NATIONAL-DEFENSE FEATURES MIGHT BE PAID FOR BY THE COMMISSION ONLY WHEN FINANCIAL AID HAD BEEN SOUGHT AND GRANTED AND NOT WHERE THE CONSTRUCTION WAS PRIVATELY FINANCED. IN A SUPPLEMENTAL OPINION OF DECEMBER 31, 1936, TO THE SECRETARY OF THE COMMISSION MR. BELL CONFIRMED THE CONCLUSION ARRIVED AT IN HIS EARLIER OPINION BUT EXPRESSLY RESERVED THE QUESTION OF WHETHER PAYMENT FOR NATIONAL DEFENSE FEATURES MIGHT BE MADE BY THE COMMISSION IF THE APPLICANT SHOULD BE GRANTED AUTHORITY TO PRIVATELY FINANCE THE CONSTRUCTION OF A VESSEL TO ENGAGE IN FOREIGN TRADE. MR. BELL SUPPLEMENTED THESE OPINIONS BY A MEMORANDUM OF JANUARY 4, 1937, SUGGESTING THAT THE HISTORY OF THE LEGISLATION SHOWED THAT THE FEATURE OF INCREASING THE SPEED OF TANKERS ABOVE THE NORMAL CRUISING SPEED OF 11 TO 12 KNOTS PER HOUR WAS NOT INTENDED BY THE CONGRESS TO BE INCLUDED WITHIN THE TERM "NATIONAL-DEFENSE FEATURES.'

IN A MEMORANDUM OPINION OF JULY 26, 1937, AND AN ADDENDUM THERETO OF OCTOBER 19, 1937, THE THEN GENERAL COUNSEL, MAX O-RELL TRUITT, OF THE COMMISSION, ARRIVED AT SUBSTANTIALLY OPPOSITE CONCLUSIONS FROM THOSE EXPRESSED SEVERAL MONTHS EARLIER BY ACTING GENERAL COUNSEL BELL; SO ALSO DID THE JUDGE ADVOCATE GENERAL OF THE NAVY (C. J. ROWCLIFF) IN HIS MEMORANDUM FOR THE CHIEF OF NAVAL OPERATIONS OF FEBRUARY 13, 1937.

ACCORDINGLY, WHEN THE QUESTION WAS PRESENTED TO THIS OFFICE FOR DECISION IN THE LETTER OF OCTOBER 19, 1937, FROM THE CHAIRMAN OF THE COMMISSION THE CAREFUL AND ILLUMINATING CONSIDERATION GIVEN IN THESE EARLIER OPINIONS WAS HELPFUL IN ARRIVING AT THE DECISION. UPON FULL CONSIDERATION IT WAS DECIDED THAT OBJECTION BY THIS OFFICE WAS NOT REQUIRED AS TO OTHERWISE PROPER PAYMENTS FOR NATIONAL-DEFENSE FEATURES EMBODIED IN THE CONSTRUCTION OF VESSELS PRIVATELY FINANCED FOR THE DOMESTIC TRADE, IF THE DECISION OF THE COMMISSION BE FURNISHED IN EACH INSTANCE THAT SUCH A PROCEDURE IS NECESSARY FOR THE NATIONAL DEFENSE AND FOR THE DEVELOPMENT OF THE FOREIGN AND DOMESTIC COMMERCE OF THE UNITED STATES AND IF IT IS FURTHER DETERMINED BY THE COMMISSION, IN COOPERATION WITH THE NAVY DEPARTMENT, THAT THE DIFFERENCE IN COST AS PROPOSED TO BE PAID BY THE COMMISSION REPRESENTS ONLY THE COST OF NATIONAL-DEFENSE FEATURES "WITHIN THE MEANING OF THE ACT.'

IT SEEMS REGRETTABLE THAT THIS QUESTION OF SO GREAT DIFFERENCE OF VIEW AMONG ADMINISTRATIVE COUNSEL OF DISTINCTION HAS NOT BEEN MADE THE SUBJECT OF EXACT LEGISLATIVE AUTHORIZATION, PARTICULARLY SO WHEN CONSIDERATION IS HAD THAT INSTEAD OF INVOLVING AN OUTLAY TO THE EXTENT OF ONLY $300,000 PER TANKER, FOR THE NATIONAL-DEFENSE FEATURES, RECITED AS TO THE APPLICATION OF MR. MALONE IN MR. BELL'S OPINION OF DECEMBER 11, 1936, YOUR PRESENT SUBMISSION SHOWS THAT THE ARRANGEMENTS OF 1938 WITH THE STANDARD OIL CO. OF NEW JERSEY, WHEREIN COMPETITIVE BIDDING IS REPORTED TO HAVE BEEN HAD, INVOLVES AN OUTLAY OF NEARLY THREE TIMES THAT AMOUNT,OR $880,250 PER TANKER, THE BENEFIT OF WHICH MAY BE WHOLLY LOST TO THE UNITED STATES AT ANY TIME IF THE OWNERSHIP IS PERMITTED BY THE COMMISSION TO BE TRANSFERRED TO A RELATIVELY IMPECUNIOUS OR IRRESPONSIBLE PARTY OR TO AN ALIEN OR FOREIGN REGISTRY.

IT APPEARS THAT SECTION 509 OF THE MERCHANT MARINE ACT HAS BEEN AMENDED BY THE ACT OF JUNE 23, 1938, 52 STAT. 953, 959, TO NOW AUTHORIZE ANY CITIZEN OF THE UNITED STATES TO MAKE APPLICATION TO THE COMMISSION FOR AID IN THE CONSTRUCTION OF A NEW VESSEL TO BE OPERATED EITHER IN THE FOREIGN OR DOMESTIC TRADE--- INSTEAD OF SOLELY IN THE DOMESTIC TRADE AS THERETOFORE--- AND THUS, IN THE LANGUAGE OF THEN CHAIRMAN KENNEDY OF THURSDAY, DECEMBER 2, 1937,"THE SECTION, AS AMENDED, WOULD ALLOW FOR THE PAYMENT BY THE COMMISSION OF NATIONAL DEFENSE FEATURES INCORPORATED IN VESSELS FOR THE FOREIGN TRADE WHERE NO CONSTRUCTION-DIFFERENTIAL SUBSIDY IS APPLIED FOR.' PAGE 9 OF THE HEARINGS ON H.R. 8532, SEVENTY-FIFTH CONGRESS, SECOND AND THIRD SESSIONS; ALSO, PAGE 21 OF SECTION 19 OF HOUSE REPORT NO. 2168 TO ACCOMPANY H.R. 10315 OF APRIL 20, 1938, SEVENTY-FIFTH CONGRESS, THIRD SESSION. IF THIS AMENDMENT HAS ANY OPERATION RESPECTING THE RULE OF THE DECISION OF OCTOBER 26, 1937, IT WOULD APPEAR TO ENLARGE ITS FIELD OF APPLICATION AND ACCORDINGLY ANY FURTHER PRIVATELY FINANCED CONSTRUCTION THE STANDARD OIL CO. OF NEW JERSEY MAY PROPOSE, INSOFAR AS PAYMENT FOR NATIONAL-DEFENSE FEATURES BY THE COMMISSION MAY BE INVOLVED, NECESSARILY WILL ENTAIL THE PRELIMINARY ADMINISTRATIVE DECISIONS AND FINDINGS AS TO EACH VESSEL WHICH ARE DESCRIBED IN SAID DECISION, BEFORE ANY PAYMENT MAY BE APPROVED, AND THAT IS TRUE IRRESPECTIVE OF WHETHER THREE OF THE TANKERS STANDARD OIL OF NEW JERSEY NOW HAS UNDER CONSTRUCTION OR A LESSER NUMBER MAY PRESENTLY BE ACQUIRED, WHEN COMPLETED, FOR PEACE- TIME USE AS NAVAL AUXILIARIES.

THE CONTRACT FOR CONSTRUCTION MADE BY THE STANDARD OIL CO. OF NEW JERSEY WITH THE SUN SHIPBUILDING AND DRY DOCK CO., DATED JANUARY 3, 1938, AS TO HULL NO. 172 ABOVE DESIGNATED (SEE P. 11, SUPRA) PROVIDES THAT THE SAID STANDARD OIL CO. SHALL PURCHASE THE SAID VESSEL UPON DELIVERY FREE OF ALL INCUMBRANCES AFTER COMPLETION AND AFTER PASSING PRESCRIBED TESTS TO THE SATISFACTION OF THE PURCHASER, THE SAID VESSEL TO BE SO DELIVERED COMPLETE ON APRIL 1, 1939, SUBJECT TO A PAYMENT OF LIQUIDATED DAMAGES AT $500 PER DAY TO THE STANDARD OIL CO. OF NEW JERSEY BY THE BUILDER FOR EACH DAY OF DELAY WHICH IS NOT EXCUSABLE UNDER THE CONTRACT; THE CONTRACT FURTHER PROVIDES FOR PROGRESS PAYMENTS IN 10 INSTALLMENTS TOTALING $3,129,667 SUBJECT TO ADJUSTMENT UPON AN EQUITABLE VALUATION BASIS FOR DULY AUTHORIZED CHANGES AND TO ADJUSTMENT NOT EXCEEDING 15 PERCENT OF AGGREGATE LABOR COSTS FOR VARIATIONS IN AVERAGE HOUR LABOR RATES, SUCH ADJUSTMENTS TO BE BETWEEN STANDARD OIL CO. OF NEW JERSEY AND THE BUILDER; THE CONTRACT PROVIDES ALSO THAT BOTH THE CONSTRUCTION AND THE OPERATION OF THE VESSEL UNTIL DELIVERY ARE TO BE SOLELY UNDER THE BUILDER'S CHARGE BUT THAT REPRESENTATIVES OF THE STANDARD OIL CO. AND THE NAVY DEPARTMENT AND THE MARITIME COMMISSION SHALL BE ALLOWED ACCESS TO THE WORKS OF THE BUILDER AND TO THE VESSEL AND HER MACHINERY, MATERIALS, FITTINGS, EQUIPMENT, ETC., AT ALL TIMES DURING THE PROGRESS OF CONSTRUCTION AND UP TO THE TIME OF DELIVERY TO THE STANDARD OIL CO. OF THE COMPLETED VESSEL. DISPUTES UNDER THE CONTRACT ARE TO BE SETTLED BY ARBITRATION UNDER THE LAW OF THE STATE OF NEW YORK BY THREE DISINTERESTED ARBITRATORS AND THE RIGHT IS RESERVED IN THE CONTRACT WHEREBY STANDARD OIL CO. MAY REQUIRE THE BUILDER TO CONSENT TO A TRANSFER OR ASSIGNMENT OF THE CONTRACT TO ANY INDIVIDUAL, FIRM, OR CORPORATION WHICH THE STANDARD OIL CO. MAY DESIGNATE. EXCEPT THAT DELIVERY DATE IS SPECIFIED AS MAY 1, 1939, THE CONTRACT BETWEEN STANDARD OIL CO. OF NEW JERSEY AND FEDERAL SHIPBUILDING AND DRY DOCK CO. (SEE P. 11, SUPRA) IS SUBSTANTIALLY SIMILAR.

THE CONTRACT BETWEEN THE UNITED STATES MARITIME COMMISSION AND STANDARD OIL CO., ALSO DATED JANUARY 3, 1938, RECITES THAT THE LOWEST RESPONSIBLE BID RECEIVED BY STANDARD FOR THE OIL-TANKER CONSTRUCTION WAS $2,200,667 WITHOUT NATIONAL-DEFENSE FEATURES AND ADDITIONAL $929,000 WITH SAID FEATURES INCLUDED, ON THE BASIS OF CONSTRUCTING THREE VESSELS OF LIKE DESIGN BY ONE SHIPBUILDING COMPANY, OR $2,184,250 AND $880,250, RESPECTIVELY, ON THE BASIS OF CONSTRUCTING FOUR VESSELS OF LIKE DESIGN BY ONE COMPANY BUT THAT STANDARD OIL CO., IN ITS OWN INTEREST AND IN PUBLIC INTEREST, WILL HAVE CONSTRUCTION OF ONLY THREE BY ANY ONE SHIPBUILDING COMPANY, THE MARITIME COMMISSION TO PAY BUT THE $880,250 WHICH THE NATIONAL-DEFENSE FEATURES WOULD COST IF AWARD FOR FOUR VESSELS WERE MADE TO ONE BUILDER BUT THIS FIGURE TO BE SUBJECT TO ADJUSTMENT PRO RATA FOR CHANGES AND WAGE RATES UPON THE SAME BASIS PROVIDED IN THE CONSTRUCTION CONTRACT WITH THE BUILDER ABOVE DESCRIBED. THE CONTRACT THEN PROVIDES (1) THAT STANDARD OIL CO. OF NEW JERSEY SHALL HAVE EXCLUSIVE CONTROL AND SUPERVISION OF THE CONSTRUCTION BUT THAT NO CHANGES ARE TO BE MADE IN PLANS AND SPECIFICATIONS WITHOUT WRITTEN APPROVAL OF THE NAVY DEPARTMENT AND THE COMMISSION; (2) THAT THE COMMISSION SHALL CONTRIBUTE PRO RATA TO PROGRESS PAYMENTS; (3) THAT ANY LIQUIDATED DAMAGES RECEIVED FROM THE BUILDER BECAUSE OF DELAY IN DELIVERY OF THE VESSEL SHALL BELONG TO STANDARD OIL CO., BUT THAT THE MARITIME COMMISSION SHALL SHARE IN THE RATIO OF ITS CONTRIBUTION IN ANY LIQUIDATED DAMAGES RECEIVED FROM THE BUILDER FOR DEFICIENCY IN THE DEAD WEIGHT CAPACITY OF THE VESSEL; (4) THAT THE MARITIME COMMISSION SHALL EXECUTE SUCH INSTRUMENTS AS STANDARD OIL CO. MAY REQUIRE DISCLAIMING ANY PROPERTY INTEREST IN THE VESSELS BY REASON OF THE INCORPORATION OF THE NATIONAL-DEFENSE FEATURES AT MARITIME COMMISSION EXPENSE SO THAT FULL AND COMPLETE TITLE WILL VEST IN STANDARD OIL CO., SUBJECT TO REQUISITION UPON PAYMENT TERMS SPECIFIED, DURING ANY NATIONAL EMERGENCY DECLARED BY PROCLAMATION OF THE PRESIDENT AND THEN ONLY SO LONG AS THE VESSEL IS DOCUMENTED UNDER THE LAWS OF THE UNITED STATES; AND (5) THAT THE OWNER AND EACH SUCCEEDING OWNER DURING THE LIFE OF VESSEL, BUT NOT EXCEEDING 20 YEARS, SHALL MAINTAIN THE VESSEL IN A THOROUGHLY SEAWORTHY CONDITION AND FIT AND SUITABLE FOR REQUISITION FOR NAVAL OR MILITARY USE AND THAT THE MARITIME COMMISSION MAY SURVEY THE VESSEL ANNUALLY TO DETERMINE WHETHER THE NATIONAL-DEFENSE FEATURES ARE BEING PROPERLY MAINTAINED BUT THAT OWNER SHALL NOT BE REQUIRED TO MAKE ANY EXTRAORDINARY REPAIRS OR TO REBUILD THE HULL OF THE VESSEL TO RESTORE PORTIONS DETERIORATED BY CARGOES CARRIED OR TO REPLACE IF VESSEL BECOMES AN ACTUAL OR CONSTRUCTIVE LOSS. THE CONTRACT LIKEWISE PROVIDES THAT STANDARD OIL MAY SELL OR ASSIGN THE VESSEL TO ANY PARTY QUALIFYING AS A CITIZEN AND MAY ASSIGN THE CONSTRUCTION CONTRACT OR SELL THE VESSEL TO AN ALIEN ONLY WITH THE EXPRESS APPROVAL OF THE MARITIME COMMISSION OR OTHER DULY AUTHORIZED UNITED STATES AGENCY THE RESTRICTIVE PROVISIONS AS TO MAINTENANCE AND TRANSFER OF OWNERSHIP TO RUN WITH THE TITLE AND BE BINDING ON ALL SUBSEQUENT OWNERS.

UNDER THIS CONTRACT (ART. 30) IT IS RESERVED THAT WHILE LEGAL TITLE REMAINS IN THE STANDARD OIL CO. THE UNITED STATES SHALL HAVE THE RIGHT TO PURCHASE THE TANKER AT A PRICE A COMPARABLE TANKER OF COMMERCIAL CRUISING SPEED COULD BE CONSTRUCTED AT THE TIME WITHOUT NATIONAL-DEFENSE FEATURES, SUBJECT TO A DEDUCTION OF 5 PERCENT FOR EACH YEAR THEN ELAPSED SINCE DELIVERY OF THE COMPLETED VESSEL. IT IS NOT UNDERSTOOD, AS PRESENTLY PROPOSED, THAT THE PRESIDENT OR THE NAVY DEPARTMENT SHALL ACQUIRE ANY COMPLETED VESSEL UNDER THIS ARTICLE FOR CONVERSION ALTHOUGH NO EVIDENCE IS FURNISHED AND PROBABLY IT COULD NOT BE ESTABLISHED AT THIS TIME WHETHER THAT WOULD BE MORE OR LESS FAVORABLE AT THE TIME OF COMPLETION OF THE VESSEL.

THE RIGHT TO REQUISITION (ART. 29) ABOVE REFERRED TO RUNS WITH THE TITLE OR OWNERSHIP SO LONG AS THE VESSEL IS DOCUMENTED UNDER THE LAWS OF THE UNITED STATES AND IN VIEW OF THE BASIC LAW IT WOULD SEEM FOR ACCEPTANCE THAT THE COMMISSION NEVER WOULD APPROVE WITHOUT SPECIFIC AUTHORIZING LEGISLATION A SALE OR ASSIGNMENT WHICH WOULD RESULT IN THE VESSEL BEING DOCUMENTED OTHERWISE. AS STATED HEREINBEFORE, THIS RIGHT OF REQUISITION EXISTS DURING ANY NATIONAL EMERGENCY DECLARED BY THE PRESIDENT, AND WHEN THE VESSEL IS TAKEN OR USED THEREUNDER THE CONTRACT PROVIDES THE OWNER SHALL BE PAID ONLY THE FAIR ACTUAL VALUE OF THE VESSEL AT THE TIME OF TAKING, OR ONLY JUST COMPENSATION FOR USE EXCLUDING THE VALUE OF NATIONAL- DEFENSE FEATURES PREVIOUSLY PAID FOR BY THE COMMISSION AND SUCH VALUE OR COMPENSATION IS IN NO CASE TO BE ENHANCED BY THE CAUSES NECESSITATING THE TAKING, OR TO INCLUDE CONSEQUENTIAL DAMAGES ARISING FROM THE TAKING OR USE.

UPON THE RECORD AS RECITED TO THIS POINT, AND NOTWITHSTANDING THE ASSERTIONS ABOVE QUOTED (BOTTOM P. 10) THAT THE NAVY DEPARTMENT HAD CONCLUDED IN JANUARY 1938 THAT IT DESIRED TO TAKE OVER ONE OF THESE VESSELS, IT SEEMS CLEAR THAT UP TO THE PASSAGE OF THE NAVAL APPROPRIATION ACT OF APRIL 26, 1938, CITED, THE CONGRESS HAD NOT AUTHORIZED THE MARITIME COMMISSION TO PURCHASE THESE NEW TANKERS NOR HAD IT AUTHORIZED OR APPROPRIATED FUNDS FOR THE PURCHASE OR ACQUIREMENT THEREOF BY THE NAVY DEPARTMENT FOR CONVERSION AND USE AS NAVAL AUXILIARIES IN TIME OF PEACE.

THE VESSELS, UNDER THE CONTRACTS MADE, ARE READILY AVAILABLE IN THE EVENT OF ANY EMERGENT NEED THEREFOR FOUND BY THE PRESIDENT OR FOR WAR TIME USE, THROUGH REQUISITION OR PURCHASE AS THE CONGRESS MAY PROVIDE APPROPRIATIONS.

WHETHER, THEREFORE, THE NAVY DEPARTMENT CONSTRUCTS THREE NEW OIL TANKERS FOR PEACE-TIME USE OR THE STANDARD OIL CO. CONSTRUCTS THREE ADDITIONAL OIL TANKERS AT SOME FUTURE TIME WITH NATIONAL DEFENSE FEATURES EMBODIED THEREIN AND THERE ARE ACQUIRED AND CONVERTED FOR THE NAVY USE THREE SUCH VESSELS, AT COMPLETION, WHICH ARE NOW UNDER CONSTRUCTION FOR STANDARD OIL CO.--- IN THE MANNER AS PROPOSED--- IT WOULD SEEM THAT THE RESULT IN NET OUTLAY OF COMMISSION FUNDS FOR NATIONAL-DEFENSE FEATURES WOULD NOT BE CHANGED NOR WOULD THE NUMBER OF TANKERS WHICH WOULD BE AVAILABLE IN TIME OF WAR OR PROCLAIMED EMERGENCY BE INCREASED. HOWEVER, IF THE NAVY SHOULD CONSTRUCT SUCH VESSELS IN ACCORDANCE WITH THE USUAL STANDARD NAVY PRACTICE FOR SUCH CONSTRUCTION IT APPARENTLY WOULD RESULT IN PRODUCING DIRECTLY TO COMPLETION A MATERIALLY MORE SATISFACTORY TANKER FOR NAVY USE (SEE PARAGRAPH QUOTED AT TOP OF P. 14, SUPRA) AND WOULD OPERATE TO AVOID WHAT THE PROPOSED PROCEDURE WOULD ENTAIL, OF COMPLETING AND TESTING THE VESSELS FIRST FOR COMMERCIAL USE IN A PRIVATE YARD AND THEN REMOVING THEM TO A NAVY YARD AND CONVERTING AND TESTING THEM FOR USE AS NAVY AUXILIARY VESSELS. THERE APPEARS NO RECORD OF EXPERIENCE OR DETAILED CONVERSION PLANS FROM WHICH SUCH COSTS COULD BE COMPUTED.

MOREOVER, STANDARD OIL CO. HAS NOT LEGALLY BOUND ITSELF TO CONSTRUCT THREE ADDITIONAL TANKERS OR ANY ADDITIONAL TANKER EMBODYING NATIONAL DEFENSE FEATURES OR TO SECURE RESPONSIBLE OWNERSHIP WHICH WOULD ASSURE AVAILABILITY OF SUCH VESSELS IN A HIGH STATE OF MAINTENANCE FOR READY CONVERSION TO NAVY USE IN CASE OF NEED. WHAT STANDARD STATES IS THAT IF PROPOSAL IS APPROVED ITS ,PRESENT PURPOSE" WOULD BE TO PLACE ORDERS "AS SOON AS CONDITIONS WARRANT.' ACCORDINGLY, UPON THE BASIS OF THE RECORD PRESENTED NO CONCLUSION COULD BE DRAWN THAT IT WOULD BE EITHER IN THE INTEREST OF POTENTIAL NAVAL STRENGTH OR OF NATIONAL DEFENSE TO PURSUE THE PROCEDURE PROPOSED UNLESS--- PERHAPS--- ON THE SUGGESTED THEORY OF ECONOMY.

THE ECONOMY SUGGESTION, ON THE BASIS OF THE RECORD, HOWEVER, IS NOT PERSUASIVE. IT WOULD SEEM SELF-EVIDENT THAT IF IDENTICAL VESSELS ARE CONSTRUCTED AND PREVAILING WAGES ARE PAID WITH DUE REGARD FOR MAXIMUM WORKING HOURS, AND IF CONSTRUCTION SPECIFICATIONS ESSENTIAL TO AN EFFECTIVE NAVAL AUXILIARY ARE HONESTLY AND FAITHFULLY MET AND IF THE BUILDER RECEIVES A FAIR PROFIT THEN IT WOULD COST MATERIALLY MORE TO CONSTRUCT SUCH A VESSEL IN A PRIVATE YARD FIRST COMPLETING AND DELIVERING AND TESTING THE SAME FOR USE IN COMMERCIAL TRADE AND THEN TO TRANSFER THE VESSEL TO A NAVY YARD FOR CONVERSION AND ARMAMENT AS A NAVAL AUXILIARY AND FOR RETEST AND TRIAL RUNS TO MEET NAVY REQUIREMENTS THAN IT WOULD TO CONSTRUCT THAT VESSEL ORIGINALLY FOR USE AS A NAVAL OIL TANKER BY DIRECT NAVY CONTRACT OR IN A NAVY YARD WHERE ADEQUATE OFFICIAL INSPECTION WOULD PREVAIL AND WHERE LABOR AND MATERIALMEN COULD BE ASSURED THAT THEY WOULD RECEIVE WHAT THE STATUTORY LAWS PROVIDE THEY SHALL RECEIVE. ON JANUARY 6, 1938, IN CONNECTION WITH THE NAVY DEPARTMENT APPROPRIATION BILL FOR 1939 (HEARINGS, P. 765), ADMIRAL DUBOSE, CHIEF OF THE BUREAU OF CONSTRUCTION AND REPAIR, TESTIFIED THAT "BROADLY SPEAKING THE PRIVATE SHIP-YARD BID AND THE NAVY-YARD ESTIMATE, INCLUDING THE APPROPRIATION COST, ARE COMPARABLE" BUT THAT IN THE CASE OF THE TWO BATTLESHIPS NOW UNDER CONSTRUCTION AS TO WHICH ESTIMATES WERE RECEIVED FROM TWO NAVY YARDS AND BIDS WERE RECEIVED FROM THREE PRIVATE SHIPBUILDING YARDS THE LOWEST RESPONSIBLE PRIVATE BID WAS $47,829,994 WHEREAS THE NEW YORK NAVY YARD ESTIMATE, INCLUDING PROPER STATISTICAL AND APPROPRIATION COSTS, WAS $37,265,843 OR "ROUGHLY $10,000,000 LESS THAN THE LOW PRIVATE BID.' AT PAGE 537 OF THESE SAME HEARINGS (TESTIMONY OF DECEMBER 17, 1937), APPEARS THE FOLLOWING:

MR. UMSTEAD. MATERIAL IS NOT NOW GOING UP, IS IT? ON THE CONTRARY, IT IS GOING DOWN, IS IT NOT?

ADMIRAL DUBOSE. THAT IS TRUE * * *.

IN THE LANGUAGE OF ADMIRAL BOWEN, APPEARING AT PAGE 395 OF THESE SAME HEARINGS,"* * * ESTIMATES, AS EVERYBODY KNOWS, ARE NOT FIRM FIGURES," AND IN VIEW OF THE MANY UNKNOWNS AND ENTIRE LACK OF COMPETENT PROOF NO CONCLUSIONS MAY SAFELY BE DRAWN FROM THE ECONOMY SUGGESTIONS IN CONNECTION WITH THE PRESENT PROPOSAL, EVEN WERE THAT A CONTROLLING FACTOR IN THIS INSTANCE, WHICH IT IS NOT.

THE OPINION OF THE GENERAL COUNSEL OF THE MARITIME COMMISSION CONTAINS A SUGGESTION (QUOTED BOTTOM OF P. 9, SUPRA) THAT SECTION 207 OF THE AMENDED MERCHANT MARINE ACTS, 1938, MAY AUTHORIZE THE COMMISSION TO MAKE THE PURCHASE OF THE STANDARD OIL CO. TANKERS--- WHEN COMPLETED--- FOR THE NAVY ACCOUNT, IN THE ABSENCE OF A PROHIBITION OTHERWISE IN THE SAID ACT. HOWEVER, THE HISTORY OF THAT AMENDED SECTION PERSUADES TO THE CONTRARY, AND THE CONCLUDING PARAGRAPH OF THE SAID GENERAL COUNSEL'S OPINION (QUOTED HEREIN, P. 10) IS RESTED UPON REASONING WHICH SEEMS MORE PERSUASIVE, IF THE NAVY HAS AVAILABLE APPROPRIATIONS WHICH ARE ADEQUATE TO ACQUIRING AND CONVERTING.

WHILE THE ACT OF JUNE 23, 1938, 52 STAT. 953, 954, DID AMEND SECTION 7 OF THE MERCHANT MARINE ACT OF 1936 TO PERMIT THE COMMISSION TO "MAKE SUCH DISBURSEMENTS AS MAY IN ITS DISCRETION BE NECESSARY TO CARRY ON THE ACTIVITIES AUTHORIZED BY THIS ACT OR TO PROTECT, PRESERVE, OR IMPROVE THE COLLATERAL HELD BY THE COMMISSION TO SECURE INDEBTEDNESS IN THE SAME MANNER THAT A PRIVATE CORPORATION MAY CONTRACT WITHIN THE SCOPE OF THE AUTHORITY CONFERRED BY ITS CHARTER," THAT AUTHORITY EVIDENTLY WAS NOT DEEMED BY THE CONGRESS AS SUFFICIENTLY BROAD TO VEST IN THE COMMISSION A GENERAL POWER TO PURCHASE VESSELS, EVEN FOR ITS OWN ACCOUNT.

HAD SUCH BEEN THE PURPOSE OF THE AMENDMENT, IT WOULD HAVE BEEN UNNECESSARY AND FRIVOLOUS FOR THE CONGRESS TO ADD JUST BELOW THE ENTIRELY NEW SECTION 215 IN THE ACT OF JUNE 23, 1938, 52 STAT. 953, 954, AS FOLLOWS:

THE COMMISSION IS AUTHORIZED TO ACQUIRE BY PURCHASE OR OTHERWISE SUCH VESSELS CONSTRUCTED IN THE UNITED STATES AS IT MAY DEEM NECESSARY TO ESTABLISH, MAINTAIN, OR EFFECT REPLACEMENTS UPON ANY SERVICE, ROUTE, OR LINE IN THE FOREIGN COMMERCE OF THE UNITED STATES DETERMINED TO BE ESSENTIAL UNDER SECTION 211 OF THIS ACT, AND TO PAY FOR THE SAME OUT OF ITS CONSTRUCTION FUND, ETC., CONTINUING WITH FURTHER RESTRICTIONS ON AUTHORITY TO SO PURCHASE.

THEN CHAIRMAN KENNEDY, IN HIS TESTIMONY OF DECEMBER 2, 1937 (PP. 4-5 OF HEARINGS ON H.R. 8532), EXPLAINED THE PURPOSE OF AMENDING SECTION 207 AS FOLLOWS:

THE AMENDMENT TO SECTION 207 OF THE ACT IS DESIGNED TO MAKE CLEAR A POWER WHICH IT IS THOUGHT ALREADY EXISTS IN THE COMMISSION BUT ABOUT WHICH SOME DOUBT HAS BEEN EXPRESSED. THE SPECIFIC REFERENCE TO THE POWER OF PROTECTING AND PRESERVING THE COLLATERAL MORTGAGES, AND SO FORTH, HELD BY THE COMMISSION IS INTENDED TO MAKE CERTAIN THAT THE COMMISSION POSSESSES THE AUTHORITY TO EXPEND FUNDS FOR THIS PURPOSE. SUCH POWER HAS OFTEN BEEN EXERCISED BY OTHER GOVERNMENTAL LENDING AGENCIES, SUCH AS THE RECONSTRUCTION FINANCE CORPORATION, AND IS IN ACCORD WITH GOOD BUSINESS PRACTICE. WITHOUT SUCH AUTHORITY THE COMMISSION MAY FIND IT IMPOSSIBLE TO PROTECT ITS MORTGAGE OR OTHER INTEREST IN VESSELS, THE TITLE TO WHICH IS IN A TRANSITORY STATE, OR WHERE VESSELS ARE OPERATED BY COMPANIES WHICH ARE FINANCIALLY EMBARRASSED WHEN SUCH VESSELS, BECAUSE OF ACCIDENT OR OTHERWISE, NEED TO BE REPAIRED OR SALVAGED BEFORE FURTHER OPERATION.

THIS VIEW APPEARS TO HAVE BEEN ADOPTED AS CORRECT BY THE HOUSE COMMITTEE ON MERCHANT MARINE AND FISHERIES IN REPORTING OUT THE SUCCESSOR BILL (H.R. 10315) (HOUSE REPORT NO. 2168 OF APRIL 20, 1938, 75TH CONG., 3D SESSION, AT P. 17). WHAT IS EXPECTED OF THE COMMISSION IN PEACE TIMES SEEMS SUMMARIZED IN LANGUAGE GENERALLY APPLICABLE IN THE FOLLOWING EXTRACTS FROM PAGES 6 AND 13 OF THIS SAME REPORT REFERRING TO SPECIFIC ITEMS AS FOLLOWS:

WE MUST HAVE SHIPS BUILT FOR CONVERSION INTO ARMED VESSELS IN TIME OF WAR, AND SHIPS THAT MAY BE USED AS COLLIERS, FUEL CARRIERS, WORK SHIPS, HOSPITAL SHIPS, AIRPLANE CARRIERS, AND FOR OTHER DEFENSE PURPOSES. * * *

THE NATIONAL DEFENSE AFFORDED IS NOT FOR THE PACIFIC COAST ALONE, FOR THESE SUBSIDIZED VESSELS, WHEN NEEDED, ARE AS AVAILABLE FOR PROTECTION OF THE ATLANTIC, THE GULF COAST, AND THE CANAL ZONE AS WELL AS FOR THE PACIFIC COAST.

THERE CAN BE NO QUESTION THAT NAVAL AUXILIARIES OF THIS TYPE ARE NEEDED. IT WILL BE MORE ECONOMICAL TO PROVIDE THEM IN THIS WAY THAN TO BUILD NAVAL AUXILIARIES OF THIS CHARACTER TO BE USED AND MAINTAINED ONLY IN NAVAL SERVICE, WITH THE ADDITIONAL EXPENSE TO THE GOVERNMENT WHICH WOULD FOLLOW.

IF THERE IS AN APPROPRIATION AVAILABLE ADEQUATE TO THE ACQUIRING AND CONVERTING OF ANY ONE OF THESE VESSELS FOR THE NAVY (HAVING DUE REGARD FOR SECS. 3672, 3678, AND 3679, REV.STAT., AS AMENDED, 41 U.S.C. 11 AND 31 U.S.C. 628 AND 665, RESPECTIVELY), THE PRESIDENT HAVING SETTLED EVERY OTHER NECESSARY QUESTION THROUGH THE EXERCISE OF HIS DISCRETION HEREINBEFORE RECITED, THE COMMISSION, NOT BY REASON OF ANY INDEPENDENT AUTHORITY IN ITSELF TO PURCHASE OR ACQUIRE, BUT AS PART OF THE INTEGRATED TRANSACTION (SEE CONCLUSION QUOTED P. 10, SUPRA, FROM THE OPINION OF COMMISSION'S GENERAL COUNSEL) AND BY REASON OF ITS EXISTING CONTRACT WITH STANDARD MAY PARTICIPATE THEREIN TO SUCH EXTENT AS IS NECESSARY TO THE ACQUIRING AND TRANSFER TO THE NAVY OF THE COMPLETED VESSEL MEETING THE CONTRACT REQUIREMENTS AND OF ALL THE RIGHTS WHICH THE COMMISSION HAS RESERVED OR MAY ENFORCE UNDER SAID CONTRACT ON BEHALF OF THE UNITED STATES AND IN THE PUBLIC INTERESTS. THIS OFFICE WILL NOT BE REQUIRED TO OBJECT TO REIMBURSEMENT OF THE COMMISSION'S FUND FROM THE NAVY APPROPRIATION IN CONNECTION WITH THIS TRANSACTION TO THE EXTENT OF THE NECESSARY EXPENDITURES UPON THE NATIONAL-DEFENSE FEATURES. ANY OTHER COURSE WOULD RESULT IN AUGMENTING THE NAVY APPROPRIATION BEYOND WHAT THE CONGRESS HAS SEEN FIT TO MAKE AVAILABLE. IT WAS FROM THE ACTUAL CONSTRUCTION OF THE ONE OILER AUTHORIZED IN THE ACT OF JULY 30, 1937, 50 STAT. 544, SUBJECT TO DIRECT SUPERVISION, DIRECTION, AND INSPECTION BY NAVY OFFICIALS, THAT THE SENATE COMMITTEE HAVING CHARGE OF THE LEGISLATION REPORTED TO THE SENATE THERE WOULD BE DERIVED ,EXPERIENCE IN DEVELOPING THE TYPE OF VESSEL THAT WOULD BE NEEDED FOR QUANTITY PRODUCTION IN TIME OF WAR," AND, ALSO, THE DATA UPON WHICH TO BASE CONVERSION PLANS OF MERCHANT SHIPS TAKEN OVER IN AN EMERGENCY" (P. 16, SUPRA). THERE HAS NOT BEEN FOUND EITHER IN THE HISTORY OF THAT ACT OR OF THE ACTS MAKING THE APPROPRIATIONS TO COMMENCE AND COMPLETE THE CONSTRUCTION ANY EVIDENCE OF A PURPOSE TO AUTHORIZE THE ACQUIRING OF AN OIL TANKER FROM A PRIVATE OWNER, UPON COMPLETION SOME MONTHS HENCE, CONSTRUCTED PRIMARILY FOR DOMESTIC TRADE, AND THE CONVERTING THEREOF FOR NAVAL USE IN TIME OF PEACE. NEITHER IS ANY SUCH AUTHORITY FOUND IN THE LANGUAGE OF THE STATUTES THEMSELVES. ACCORDINGLY, AS TO THE OILER AUTHORIZED TO BE CONSTRUCTED MORE THAN 14 MONTHS AGO, JULY 30, 1937, FOR THE COMMENCEMENT OF WHICH APPROPRIATION WAS MADE APRIL 26, 1938 (52 STAT. 223, 242), AND THE APPROPRIATION FOR COMPLETING WAS MADE JUNE 25, 1938 (52 STAT. 1114, 1142/--- IT MUST BE HELD THAT THERE IS NO AUTHORITY TO USE ANY PART OF THAT APPROPRIATION FOR OBTAINING ONE OF THE TANKERS NOW UNDER CONSTRUCTION BY THE STANDARD OIL CO. OF NEW JERSEY UPON ITS COMPLETION--- SOME MONTHS HENCE.

AS FOR THE APPROPRIATION MADE AVAILABLE IN THE CITED SECOND DEFICIENCY ACT OF JUNE 25, 1938, 52 STAT. 1114, 1142, FOR THE COMMENCEMENT OF TWO OIL TANKERS AUTHORIZED BY THE NAVY EXPANSION ACT APPROVED MAY 17, 1938, THE LEGISLATIVE HISTORY AND THE LANGUAGE OF THE ACT AUTHORIZING THE USE OF THE APPROPRIATION MAY WARRANT A DIFFERENT DECISION IF THE AMOUNT THEREIN PROVIDED OTHERWISE IS ADEQUATE. THE REPORT NO. 2614 OF THE HOUSE COMMITTEE ON APPROPRIATIONS, SUBMITTED JUNE 7, 1938, SEVENTY-FIFTH CONGRESS, THIRD SESSION, RELATIVE TO THE NAVY ITEMS IN THE SECOND DEFICIENCY BILL (H.R. 10851), INSOFAR AS PERTINENT FOR PRESENT CONSIDERATION IN THE PRESENT MATTER, IS AS FOLLOWS:

NAVAL BUILDING PROGRAM

THE BILL CARRIES A TOTAL OF $41,775,167.19 UNDER THE NAVY DEPARTMENT. THIS AMOUNT, $35,802,000 IS ON ACCOUNT OF THE NAVAL SHIPBUILDING PROGRAM UNDER THE PRESIDENT'S MESSAGE OF JANUARY 28, 1938, AND AS FURTHER AUTHORIZED BY THE NAVAL EXPANSION ACT OF MAY 17, 1938, INCLUDING FUNDS FORYARD AND STATION FACILITIES IN CONNECTION WITH THE EXPEDITION OF AND REDUCTION IN THE COST OF EXECUTING SUCH PART OF THE NEW SHIPBUILDING NOW UNDER WAY OR SUBSEQUENTLY TO BE UNDERTAKEN IN GOVERNMENT YARDS. THE DIFFERENCE BETWEEN THESE TWO FIGURES ($41,775,167.19) WHICH THE BILL CARRIES FOR ALL NAVAL PURPOSES AND $35,802,000 FOR SHIPBUILDING, OR $5,973,167.19, IS FOR OTHER NAVAL PURPOSES AND WILL BE DEALT WITH ELSEWHERE IN THIS REPORT (P. 23).

ALL OF THE SHIPS AND PROJECTS WHICH THE COMMITTEE RECOMMEND ARE IN PURSUANCE OF THE ENLARGED NAVAL POLICY OUTLINED BY THE PRESIDENT IN HIS MESSAGE OF JANUARY 28 AND, WITH THE EXCEPTION OF THE TWO BATTLESHIPS, ARE PURSUANT TO AUTHORIZATION IN THE NAVAL EXPANSION ACT OF MAY 17, 1938, OR INCIDENTAL TO THE PURPOSES AUTHORIZED BY THAT ACT.

THE COMMITTEE SEES NO NEED FOR REITERATING IN THIS REPORT THE FACTS AND CIRCUMSTANCES ATTENDANT UPON OUR ENLARGED NAVAL PROGRAM, AS THEY ARE WELL KNOWN TO THE CONGRESS AND THE COUNTRY THROUGH THE PRESIDENT'S MESSAGE AND THE DISCUSSIONS WHICH HAVE SO RECENTLY TAKEN PLACE IN CONNECTION WITH THE ENACTMENT OF THE NAVAL EXPANSION ACT. * * *

THE COMMITTEE HAS INCLUDED IN THE BILL THE SUM OF $8,050,000 FOR COMMENCING WORK ON 9 OF THE 13 VESSELS ESTIMATED FOR UNDER THE NAVAL EXPANSION ACT AS FOLLOWS: 2 LIGHT CRUISERS, 1 LARGE SEAPLANE TENDER, 1 MINE SWEEPER, 1 DESTROYER TENDER, 2 OIL TANKERS, AND 2 FLEET TUGS.

PLANS FOR THESE VESSELS ARE READY AND THEIR CHARACTERISTICS AND ESTIMATES OF COST ARE AS WELL ESTABLISHED AS THEY CAN BE IN ADVANCE OF COMMENCEMENT OF ACTUAL WORK.

THESE COMMENTS OF THE APPROPRIATION COMMITTEE SEEM PROPERLY FOR CONSIDERATION ALONG WITH THE LEGISLATIVE HISTORY AND THE AUTHORIZATION LANGUAGE CONTAINED IN THE CITED NAVAL EXPANSION ACT OF MAY 17, 1938 (H.R. 9218).

THE FOLLOWING PERTINENT TESTIMONY IN SUPPORT OF THE NAVY EXPANSION PROGRAM IS FROM THE HEARINGS ON H.R. 9218:

FEBRUARY 2, 1938, PAGE 1995.

MR. BREWSTER. ABOUT OUR MERCHANT MARINE, WHAT IS CONTEMPLATED?

ADMIRAL LEAHY. THE MERCHANT MARINE IN TIME OF WAR WILL BE CALLED UPON TO SUPPLY VESSELS TO BE USED IN PROVIDING THE FLEET WITH THOSE THINGS THAT IT NEEDS IN THE CAMPAIGN. WE HAVE NOW AN INADEQUATE MERCHANT MARINE. IT IS APPARENTLY BUILDING UP AT A BETTER RATE THAN HERETOFORE, AND IN THE NEAR FUTURE IT IS EXPECTED THAT WE WILL HAVE A SATISFACTORY NUMBER OF VESSELS IN THE MERCHANT MARINE TO PROVIDE THE FLEET WITH THOSE THINGS WHICH IT NEEDS IN A CAMPAIGN.

MR. BREWSTER. WITH THE 15,000-MILE CRUISING RADIUS, WOULD WE BE LIABLE TO EXCEED THAT IN OPERATIONS OF A DEFENSIVE CHARACTER?

ADMIRAL LEAHY. I SHOULD THINK NOT, BUT, OF COURSE, THE FLEET IS NOT GOING TO BE IN ANY ONE PARTICULAR PLACE AT ANY TIME AND IT WILL BE NECESSARY TO PROVIDE FUEL AND SUPPLIES FOR THE FLEET AS IT MOVES ABOUT THE OCEAN.

MR. BREWSTER. THE 20 TANKERS THAT WERE RECENTLY ANNOUNCED AS A PROGRAM OF THE MARITIME COMMISSION--- WHAT WILL BE THE ARRANGEMENT FOR THE CONSTRUCTION OF THE 20 TANKERS?

ADMIRAL LEAHY. IT IS MY UNDERSTANDING THAT THE MARITIME COMMISSION HAS ARRANGED FOR THE CONSTRUCTION OF 12 TANKERS.

MR. BREWSTER. THOSE WILL BE AVAILABLE AS AUXILIARIES IN THE EVENT OF WAR?

ADMIRAL LEAHY. THEY WILL BE JUST AS AVAILABLE AS ANY OTHER AMERICAN MERCHANT SHIPS.

MR. BREWSTER. YOU SAID THAT THE REST OF THE PROGRAM OF THE MERCHANT MARINE WAS MOVING AHEAD. HAVE YOU ANY DEFINITE INFORMATION ON THAT?

ADMIRAL LEAHY. I AM IN COMMUNICATION WITH THE MARITIME COMMISSION FROM TIME TO TIME, AND I KNOW THEY ARE WORKING ON A PROGRAM TO PROVIDE THE AMERICAN MERCHANT MARINE WITH SOME SATISFACTORY VESSELS OF VARIOUS TYPES, CARGO VESSELS, OIL TANKERS, AND SOME COMBINATION PASSENGER VESSELS. I AM NOT ACCURATELY INFORMED AS TO THEIR PROGRAM, BUT I KNOW THAT IT IS IN PROCESS. MR. BREWSTER. THAT IS EXTREMELY IMPORTANT, IS IT NOT, FROM THE STANDPOINT OF THE NAVY?

ADMIRAL LEAHY. I CONSIDER IT EXTREMELY IMPORTANT. WE ARE IN CONSULTATION WITH THE MARITIME COMMISSION AT ALL TIMES IN REGARD TO IT.

FEBRUARY 3, 1938, PAGE 2021:

MR. MAAS. IF THIS INCREASE IS SO URGENT AS IT WOULD APPEAR FROM YOUR TESTIMONY THAT IT IS, WHY WAS THIS PROGRAM DELAYED? WHY WAS IT NOT BROUGHT IN AHEAD OF THE REGULAR APPROPRIATION ACT? WHY IS IT BEING BROUGHT IN NOW?

ADMIRAL LEAHY. I AM NOT ACCURATELY INFORMED IN REGARD TO THAT. PRESUMABLY INFORMATION RECEIVED AFTER THE PREPARATION OF THE NAVY'S BUDGET FOR 1939, WHICH WAS PREPARED SEVERAL MONTHS AGO, INDICATED TO THE PRESIDENT THE NECESSITY FOR AN INCREASE IN THE AUTHORIZED NAVY. PRESUMABLY HE DID NOT HAVE THAT INFORMATION AT THE TIME THE 1939 BUDGET WAS PREPARED.

FEBRUARY 7, 1938, PAGES 2060-2061. ADMIRAL LEAHY:

THE OTHER CLASS OF AUXILIARY VESSELS COMPRISES TRANSPORTS, OILERS, CARGO SHIPS, AND TUGS. THESE ARE TYPES FOUND IN THE MERCHANT MARINE AND, BESIDES ARMING THEM, REQUIRE LITTLE OR NO CONVERSION TO MAKE THEM SUITABLE FOR USE AS AUXILIARIES IN TIME OF WAR. THE PRINCIPAL REQUIREMENTS FOR THIS CLASS OF VESSEL TO FIT THE NAVY'S NEED IS ADEQUATE SPEED. THE NAVY HAS A NEED FOR A FEW VESSELS OF THESE TYPES IN TIME OF PEACE TO SERVE THE FLEET KEPT IN ACTIVE SERVICE, BUT IT IS NEITHER DESIRABLE NOR NECESSARY FOR THE NAVY TO HAVE MANY VESSELS OF THESE TYPES. ITS NEED FOR THESE TYPES IN WAR CAN BE MET IF THE UNITED STATES HAS A SUFFICIENTLY NUMEROUS MERCHANT MARINE OF MODERN VESSELS. ONLY SUCH VESSELS OF THIS CLASS HAVE BEEN REQUESTED AS ARE ABSOLUTELY NECESSARY FOR USE WITH THE FLEET AT THIS TIME.

THE MARITIME COMMISSION HAS BEEN MOST COOPERATIVE IN BUILDING SHIPS THAT WILL BE OF USE TO THE NAVY IN THE EVENT OF WAR. RECENTLY CONTRACTS HAVE BEEN LET FOR 14 CARGO SHIPS AND 12 TANKERS, AND 29 ADDITIONAL SHIPS OF VARIOUS TYPES ARE PLANNED.

IT IS NECESSARY THAT NAVAL AUXILIARIES, AND MERCHANT VESSELS TAKEN OVER AS AUXILIARIES, HAVE SPEED OF 15 KNOTS OR MORE, NOT ONLY SO THAT THEY MAY ACCOMPANY THE FLEET AT ITS USUAL CRUISING SPEED, BUT ALSO TO GIVE THEM PROTECTION AGAINST SUBMARINES. THE EXPERIENCE OF THE WORLD WAR DEMONSTRATED THAT THE HIGHER SPEED OF A SHIP THE LESS HER CHANCE OF BEING SUNK BY A SUBMARINE. WHEN THE SPEED IS NOT MORE THAN 10 KNOTS A SHIP IS AN EASY PREY FOR SUBMARINES. IF THE AUXILIARY SHIPS THAT ACCOMPANY THE FLEET ARE SLOW, ALL COMBATANT SHIPS HAVE TO ACCOMMODATE THEIR SPEED TO THAT OF THE SLOWER AUXILIARIES AND EXPOSE THEMSELVES TO SUBMARINE ATTACK.

PAGE 2063:

I SHOULD LIKE NOW TO DIRECT THE ATTENTION OF THE COMMITTEE TO CERTAIN AUXILIARY VESSELS NOT AT PRESENT INCLUDED IN THIS AUTHORIZATION BILL WHICH ARE CONSIDERED ESSENTIAL TO THE EFFICIENT PEACETIME OPERATION AND TRAINING OF THE NAVY, AND FOR WHICH AUTHORIZATION SHOULD BE PROVIDED IN THIS BILL.

PAGES 2068, 2069:

EIGHT OILERS ARE NOW IN COMMISSION, FOUR WITH THE UNITED STATES FLEET, ONE WITH THE ASIATIC FLEET, TWO IN THE NAVAL TRANSPORTATION SERVICE, AND ONE AS A FLOATING OIL STORAGE AT GUAM.

ALL OF THESE ARE IN SUCH BAD MATERIAL CONDITION DUE TO AGE THAT ECONOMICAL MAINTENANCE AND CONTINUOUS SERVICE IS NOT POSSIBLE.

SIX MODERN OILERS ARE NEEDED IN PEACETIME TO SERVE THE FLEET. ONE IS ALREADY AUTHORIZED WHICH IT IS HOPED TO OBTAIN THROUGH THE MARITIME COMMISSION. AUTHORITY SHOULD BE GRANTED TO ACQUIRE AND CONVERT OR BUILD FOUR MORE.

THE STANDARD OIL CO., UNDER AN AGREEMENT WITH THE MARITIME COMMISSION, RECENTLY AWARDED CONTRACTS FOR 12 FAST OIL TANKERS OF 16 1/2 KNOTS. WHILE THE HIGH SPEED OF THE NEW TANKERS WILL REPRESENT THEIR PRIMARY NATIONAL DEFENSE FEATURE, THEY WILL HAVE ADDITIONAL FACILITIES DESIGNED AND INSTALLED FOR USE SHOULD THEY BE CONVERTED INTO NAVAL AUXILIARIES. IT IS HOPED THAT ADDITIONAL TANKERS OF THIS TYPE WILL BE BUILT.

IT IS MY OPINION THAT THERE SHOULD BE INCORPORATED IN THIS BILL AUTHORITY TO CONSTRUCT OR ACQUIRE AND CONVERT FOUR OIL TANKERS. * * *

IF AUTHORITY IS NOT OBTAINED NOW FOR THESE VESSELS, IT WILL BE NECESSARY FOR THE NAVY TO REQUEST OF CONGRESS IN THE NEAR FUTURE, AND BEFORE ALL THE VESSELS AUTHORIZED BY THE BILL ARE COMMENCED, THAT AUTHORITY BE GRANTED TO ACQUIRE OR CONSTRUCT THESE VESSELS IN ADDITION TO THOSE AUTHORIZED IN THE PRESENT BILL.

FEBRUARY 17, 1938, PAGES 2373-2374.

THE CHAIRMAN. ALL RIGHT, ARE THERE ANY OTHER SUGGESTIONS?

REAR ADMIRAL DUBOSE. THE OTHER SUGGESTION IS IN SECTION 4 OF THE BILL, WHICH NOW READS: "THE PRESIDENT OF THE UNITED STATES IS HEREBY FURTHER AUTHORIZED TO ACQUIRE OR TO UNDERTAKE THE CONSTRUCTION OF THE FOLLOWING AUXILIARY VESSELS.'

I WOULD LIKE TO HAVE THAT SECTION AMENDED BY THE INSERTION IN LINE 4,PAGE 3, AFTER THE WORD ,ACQUIRE" THESE WORDS "AND TO CONVERT.'

THE REASON FOR THAT CHANGE IS THAT THE PRESENT WORDING GIVES THE NAVY DEPARTMENT PERMISSION TO OBTAIN VESSELS FROM THE MARITIME COMMISSION, OR PURCHASE THEM, BUT AFTER WE HAVE PURCHASED THEM, UNDER THE WORDING IN THE BILL AT THE PRESENT TIME, WE CAN DO NOTHING TOWARD CONVERTING THEM.

AS PREVIOUSLY SHOWN HEREIN, THE CONGRESS DID NOT AUTHORIZE THE USE OF THE APPROPRIATION MADE AVAILABLE FOR CONSTRUCTING THE FIRST OILER TO ACQUIRE AND CONVERT A COMMERCIAL TANKER BUT--- SUBJECT TO CERTAIN RESTRICTIONS NOT HERE MATERIAL BY REASON OF THE PRESIDENT'S OK--- THERE WAS AUTHORIZED, IN PART, WHAT WAS ASKED, AS FOLLOWS:

SEC. 4. THE PRESIDENT OF THE UNITED STATES IS HEREBY FURTHER AUTHORIZED TO ACQUIRE AND CONVERT OR TO UNDERTAKE THE CONSTRUCTION OF THE FOLLOWING VESSELS:

(F) FOUR OIL TANKERS, A TOTAL OF THIRTY-TWO THOUSAND TONS LIGHT DISPLACEMENT TONNAGE; * * *

THE COMMENTS OF THE SENATE COMMITTEE ON NAVAL AFFAIRS AS TO THIS AMENDED FORM OF AUTHORIZATION APPEARS AT PAGES 1 AND 14 OF SENATE REPORT NO. 1611 ON H.R. 9218 OF APRIL 18, 1938, SEVENTY-FIFTH CONGRESS, THIRD SESSION.

INSTEAD, HOWEVER, OF APPROPRIATING FOR THE SAID FOUR OIL TANKERS THERE ONLY WERE MADE AVAILABLE LIMITED FUNDS FOR COMMENCING TWO OF SAID TANKERS. SECOND DEFICIENCY APPROPRIATION ACT OF JUNE 25, 1938, 52 STAT. 1114, 1142. IN VIEW OF THE LEGISLATIVE HISTORY WHICH IS RECITED ABOVE, HOWEVER, AND IN VIEW OF THE AUTHORIZING LANGUAGE FINALLY ADOPTED, IF THE LIMITED FUNDS SO APPROPRIATED ARE ADEQUATE TO SUCH PURPOSE (HAVING DUE REGARD FOR SECS. 3672, 3678, AND 3679, REVISED STATUTES, AS AMENDED, 41 U.S.C. 11 AND 31 U.S.C. 628 AND 665, RESPECTIVELY) WHEN THE TANKERS NOW UNDER CONSTRUCTION ARE FINALLY COMPLETED AND DELIVERED TO STANDARD OIL CO. IN ACCORDANCE WITH THE APPROVED CONTRACTS AND SPECIFICATIONS AND IF THE DECISION OF THE PRESIDENT IS THAT THEY THEN BE SO ACQUIRED AND CONVERTED THIS OFFICE WILL NOT BE REQUIRED TO OBJECT TO SUCH PROCEDURE OR TO SUCH COOPERATION THEREIN BY THE MARITIME COMMISSION AS IS NECESSARY BY REASON OF ITS PRESENT CONTRACT RELATION TO THE MATTER. IF IT IS TO BE UNDERSTOOD THAT PRESENT RUMORED THREATENED WAR CONDITIONS REFLECT THE URGENCY FOR ACQUISITION OF THESE TANKERS--- THAT SITUATION BEING NOW APPARENTLY ENDED- -- THERE MAY BE NECESSARY FOR ADMINISTRATIVE CONSIDERATION WHETHER THE NAVY DEPARTMENT HAS NEEDS OTHERWISE DEMANDING IMMEDIATE ACQUISITION OF THESE TANKERS INSTEAD OF PROCEEDING IN THE USUAL ORDERLY WAY UNDER APPROPRIATIONS APPARENTLY CONTEMPLATING CONSTRUCTION OF VESSELS BY OR UNDER THE DIRECTION AND SUPERVISION OF THE NAVY INSTEAD OF UNDER PRIVATE SUPERVISION AND DIRECTION--- SUCH TANKERS AS MAY THEN BE IN PRIVATE OWNERSHIP BEING NECESSARILY SUBJECT TO REQUISITIONING BY THE UNITED STATES SHOULD AN EVENTUALITY ARISE NECESSITATING SUCH SOVEREIGN ACTION.