72,000

30,000

42.8

12.5

30.3

8,800

16, 200

5,000

30,000

24,000

13.6

3.5

10. 1

8,000

6,000

10,000

24,000

22,000

31.0

12.5

18.5

8,900

13, 100

22,000

Analysis of increases in limits of cost recommended-Continued

Percentage

increase due Percentage
to labor and increase due

18 Retaining wall.

1 Pile foundations.

20 Increase authorized by act approved Feb. 9, 1937, funds as yet not appropriated.

21 Rock excavation and septic tank.

22 Increases authorized by act approved Feb. 9, 1937, funds as yet not appropriated.

23 Provision for 2 additional stories.

Mr. LUDLOWw. What are the factors that enter into the increased construction costs? Is that due to the increased cost of material or the increased cost of labor?

Mr. REYNOLDS. As we see it, the factors that have caused the increase are, first, the increase in the cost of materials; second, the increased cost of labor, and, third, the increased improvement of general business conditions, which permits the contractor to bid with a reasonable profit. At the very low price level, the cost was determined entirely on a competitive market where the contractors were attempting to maintain their organizations. That resulted in their bidding below cost, in the hope of chiseling something from their subcontractors. Fortunately, we are growing out of that economic condition, and the contractors can now bid with a profit, and pay their subcontractors what they are entitled to receive, so that they may likewise make a profit.

Mr. LUDLOW. You believe there were some contractors who were willing to bid without a profit in order to maintain their organizations? Mr. REYNOLDS. Yes, sir; they were willing to bid without a profit in the hope of making some profit by chiseling on their labor and material subcontractors.

Mr. SNYDER. The price of building sites is higher than in 1933 and 1934 in the same locations, I suppose.

Admiral PEOPLES. There has been some increase in the real-estate market, too. Of course, it is difficult to tell what that has been in the same communities. In the cost of sites purchased now, as compared with the cost 2 years ago, we have found a slight increase. One of the best publications on the subject of cost is the Constructor, which shows wages in the building trades, and the average wages in the principal construction cities of the United States. It indicates during the calendar year 1936 an index number of 87, which was carried up on April 1, 1937, to a little over 95. That was an increase in the index number from 87 to over 95 for labor, and materials for the same period have increased from about 87 to about 88 at the present time. Construction costs proper have gone up from about 88 to 94.

Mr. LUDLOW. You referred a little while ago to air-conditioning of buildings: About what does it cost to air-condition a building, such as you have described here?

Admiral PEOPLES. We figure about 7 cents per cubic foot.

Mr. REYNOLDS. It is 7 to 10 cents per cubic foot for projects of this size.

Mr. LUDLOW. Taking the list submitted here where you increased the limit of cost, about how many of the buildings are to be airconditioned?

Mr. MARTIN. Three of thirty-seven.

Admiral PEOPLES. Three of the thirty-seven.

Mr. LUDLOW. That is quite expensive.

Admiral PEOPLES. Yes, sir.

Mr. LUDLOW. Is that due to climatic conditions?

Mr. MARTIN. It is because of exceptional heat, or where there is a constant temperature of above 86 degrees throughout the summer.

INCREASE IN LIMIT OF COST FOR NEW YORK GRAND CENTRAL STATION POST OFFICE

Mr. WOODRUM. I call attention to the item for the New York Grand Central Station, where you are asking an increase of $1,416,000. Tell us about that.

Admiral PEOPLES. Yes, sir.

Mr. WOODRUM. This is a remodeling project, is it not?

Admiral PEOPLES. Yes, sir. This project was authorized under the provisions of the act approved June 22, 1936, and contemplated the remodeling of the building acquired under the act of July 12, 1932.

The requirements of the Post Office Department, due to the transferring of various activities to meet business demands and effect economies of operation, necessitated more extensive alterations than were originally contemplated.

The mechanical equipment has deteriorated to such an extent, due to the age of the building and the chemical reaction of the cinder concrete in the floor arches, that such equipment must be entirely replaced. The two upper office floors which are to be occupied by the Bureau of Internal Revenue will require more extensive alterations than originally proposed. The building in general is in such poor condition mechanically and a general rehabilitation will be required along with the alterations.

Mr. WOODRUM. That is the same project for which $10,000,000 was estimated.

Admiral PEOPLES. Yes, sir.

Mr. WOODRUM. 20 percent of the cost for the remodeling, is a pretty high percentage, is it not?

Mr. MARTIN. Yes, sir. This is a case where the present arrangement of the building will require the removal of one floor and the lowering of another floor, involving a difficult structural problem. Mr. Reynolds can best explain some of the remodeling features.

NATURE AND NECESSITY FOR REMODELING OF BUILDING

Mr. REYNOLDS. I made a personal visit to this project when it became apparent that the limit of cost, as established, was insufficient. We have had several inspections made, especially of the inside of the building. From the construction standpoint, the structural conditions are satisfactory, except as to the first floor and the two upper floors. On investigation to determine exactly how to make the required changes, we found that we were running into a major construction problem in order to satisfactorily accommodate the postal service. The first floor now has two levels which must be placed on the same level for effective operation. It is also necessary to remove one entire floor, becaue the floor heights are standard building heights for commercial purposes. We investigated the various schemes to leave this floor in place, but found it impossible.

The Post Office Department was unwilling to agree to anything other than the removal of the floor. The lookout galleries would come so near the first floor that the men could not get under them, and there would be no circulation of air or admission of lights, so the conclusion was reached that it must be removed. The two top floors were intended to be occupied by other activities. In our first estimate it was concluded that very little needed to be done, but on

examination it was found that it was a major problem of rehabilitation, including wiring and outlets, as well as other equipment. We can see no way by which we can remodel this building and have a satisfactory working unit within the present limit of cost.

Mr. MARTIN. There is some question, however, as to whether the increase will be $600,000 or $1,416,000.

Mr. REYNOLDS. The price of building construction in the city of New York has advanced very sharply, especially for remodeling work. Mr. WOODRUM. What is the reason for the advance in building costs so much more in New York than in other places?

Mr. REYNOLDS. We have not been able to find out.

Mr. WOODRUM. Was any such survey made before the building was contracted for by the Government, or has that developed since?

Mr. REYNOLDS. This is a development within the last year or two, when the problem came to an issue with us to remodel the building for postal purposes. The contract of sale was entered into several years ago.

Mr. WOODRUM. Why were not those facts known when the contract was entered into?

Mr. MARTIN. There was included in the report an estimate of a million dollars to convert the building over to special post-office use. Mr. WOODRUM. Is the post office occupying it now?

Mr. MARTIN. Yes, sir; part of it.

Mr. WOODRUM. Can they do that, with this remodeling work going on?

Mr. MARTIN. They are going to try. That is another factor which enters into the cost, and which it is hard to determine. It means that the work will have to be done in sections, so as not to disturb the post-office operations.

Mr. WOODRUM. Does the remodeling give them more space, or make the space more adaptable?

Mr. MARTIN. It makes it much more adaptable because, as Mr. Reynolds pointed out, two levels on the first floor for post office operations is uneconomical, and by lowering that floor and removing one of the intervening floors you make three large floors with sufficient height to permit the proper post office operations, including the belt conveyors and lookout gallery services.

Mr. WOODRUM. How much more efficient will it make the postal service? This is a big alteration.

Will you tell us, Mr. Purdum, about the necessity for this, why you have to have it?

Mr. PURDUM. The Grand Central Station in New York City is one of the largest postal units we have in that city, from the standpoint of receipts and also from the standpoint of the quantity of mail handled, aside from the main office. The postal receipts and the amount of post-office business transacted in this particular unit is greater than that in some of the States of the Union.

It is right there at the Grand Central Railroad Station, and it is a most important unit, and the mails must be handled with dispatch. The contract for the purchase of this property was entered into prior to 1933, and the Post Office Department believes that the amount requested is necessary money for improving the efficiency of the service, and for the expeditious handling of the enormous volume of mail received, distributed, delivered, and dispatched at Grand Central Station.