PROJECTS REQUIRING INCREASES IN LIMIT OF COST

Mr. WOODRUM. Do you have a copy of the list of augmentations or increases in limits of cost? I want the more important ones that you refer to, because we might want to ask some questions about them. I am not referring to the percentage that may be added administratively but the changes that require legislative authority.

Admiral PEOPLES. This will be found in report already inserted in the record (see pp. 46, 60).

Mr. WOODRUM. How much does this involve?

Mr. MARTIN. It is $6,505,500.

Mr. LUDLOW. These are increases in the limits of cost.

Admiral PEOPLES. Yes, sir.

Mr. MARTIN. Which were in excess

Mr. WOODRUM. In excess of the 10 and 15 percent?

Mr. MARTIN. Yes, sir.

Mr. WOODRUM. For which you are asking in this legislation additional funds.

Mr. MARTIN. Yes, sir; additional funds.

Admiral PEOPLES. It will have to be taken out of whatever sum may be appropriated.

Mr. WOODRUM. This list has been placed in the record.

Admiral PEOPLES. Yes, sir; that is in the statement submitted.

Mr. WOODRUM. We would like to have you go over the more important ones. Give us a bird's-eye view of what they are, because we may want to ask more detailed questions about them later, after we have examined the report.

INCREASE IN LIMIT OF COST OF BRAWLEY, CALIF., POST OFFICE

Admiral PEOPLES. One case is Brawley, Calif., post office, where the maximum limit of cost is $99,000, and where the proposed revised limit of cost is $149,000.

This project was authorized under the provisions of the act approved June 22, 1936, and contemplated the acquisition of a site and the construction of a building. The maximum space that can be provided for post-office purposes under the present limit of cost is 3,600 square feet and 800 square feet of basement space for other activities.

Subsequent investigation of Government requirements indicates that it will be necessary to provide 5,550 square feet of space for postal purposes.

Due to its location in the Imperial Valley of California, air conditioning of all working space is recommended as the temperature for the summer months frequently reaches 112 degrees.

It is estimated that $149,000 will be required to provide the additional space for postal purposes, including air-conditioning, and does not contemplate space for other activities.

Mr. WOODRUM. The increase in the limit of cost is due more to change of plans than to increased costs.

Admiral PEOPLES. It is due to an increase in the square feet of space and a change in plans, yes, sir.

Mr. WOODRUM. To what extent is that true in most of the cases? Admiral PEOPLES. I think it is true in most of the cases.

Mr. MARTIN. In addition, there is an amount required for increase in cost of labor and materials, which can be shown on the cost chart.

Mr. WOODRUM. In a general way, what has been the increase in cost?

ITEMS ENTERING INTO INCREASES IN LIMIT OF COST PROJECTS
RECOMMENDED

Admiral PEOPLES. This chart will show the construction costs of 854 small buildings based on the average of the five low bids on each project. Commencing back in 1934 the broken line indicates what the actual costs have been, and the heavy line indicates the general average. You will see the increase from 1934, and during 1935, 1936, and until April 1937.

Mr. MARTIN. It begins to level out there.

Admiral PEOPLES. That indicates the construction costs.

Mr. WOODRUM. Referring to this $6,000,000 plus, have you formed any estimates as to how much of that is due to increased costs and how much of it is due to change of plans to secure additional space?

Mr. REYNOLDS. I think it would be difficult to answer that question without a reanalysis of the program. In some cases the increase, or the major increase, is due to the increase of space requirements, although in many cases the percentage of cost increase is the main factor.

That is especially true in those cases where the estimates were made about 21⁄2 years ago. You will note that this large increase in cost was in the period when prices advanced about 30 percent in about 2 years. In some of these cases, at the time the project was submitted, we were able to anticipate this great rise, but in some of the older cases, we could not take proper account of that.

Mr. WOODRUM. Can you furnish a somewhat amplified statement of that?

Mr. REYNOLDS. We can break it down entirely, showing why the increased costs were necessary, and the various factors entering into it, such as increased construction costs and the demand for increased space.

(The information requested is as follows:)

Air-conditioning of courtroom.

Analysis of increases in limits of cost recommended-Continued

11 Rock excavation.

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. LUDLOW. 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.