The sun. [volume] (New York [N.Y.]) 1916-1920, 1917-05-26
US. SHIP PLAN
IMPERILLED BY
CONTRACT RULE.
Private Builders Revolt at
Abandoning of "Cost Plus
Fee" System.
FACE RUIN0US LOSSES
Too Much Danger From
Rising Market Seen in
Competition.
COCKTAILS GETS WARNING
Government Told to Supply
Material and Drop LUMP
Sum- Idea.
COCKTAILS GETS WARNING

Announcement of the United states
Shipping Boards decision to abandon the
cost plus fee" system and revert to
the lump sum contract for wooden and
steel vessels constructed in private yards
threatens to imperil the Governments
war building programme.
Heretofore the Government: has paid
q small part Of the cost price when the
ships keel was laid. giving additional
amounts when the vessel reached certain
other percentages of completion and
making the final payment when it was
launched and turned over to the pur-
chaser.
Under this plan the Government has
exercised careful supervision, furnishing
materials and assuring the necessary la
Dor supply Prices also have been kept
within normal limits. With its abandon
ment all the advantages gained by the
arrangement heretofore in force are lost.
In being forced into the open competitive
fe'd contractors viii run the danger Of
ervuntering a rising market and will be
made to face the uncertainties Of labor
supply. In other words they will be
compelled to assume all risks.
A greatly incres sed cost Is inevitable.
contractors say. and many engineering
firms which had expected to engage In
Government construction work will. be
forced 10 abandon their plans. Several
OF these already have made heavy out
lava In yards and in the bmiding Of
ways. which will now be Of no use to
them.
,...a, Psetest Made TO GoethaIs.
These contentious have been laid be-
fore Col. George W. Goethals. director
Of the Governments shipbuiiding by
contractors. In the last few days. They
threaten 10 cease all work II the lump
sum contract Is insisted upon.
These firms take the attitude that II
is possible for them to take part IN the
shlpbulding programme only II the
Government. continues to exercise con-
troll over the cost Of materials and labor
and takes action to keep prices stable,
which was the understanding with the
board when they offered to build ships.
IL the central purchasing system Is not
adhered to. they say. and competition
is allowed to run wild in the effort to
jump so that they could not 60 into the
shipbuilding business without asking a
sum that would make the cost to the
Government prohibitive.
On the other hand, Government Of
Metals say that the change was brough,
about because 4 was found that all sorts
Of firms were Offering to build ships foi
the Government under the guaranteed
cost system first proposed. figuring thai
they had safe thing and could not lose
Just whai the result of this would have
been in its effect on the quality of ships
turned out thev could not imagine bu
the Government agents felt that they
might be buying a pig In a poke and re
called their offer
The hrst contract proposed by thu
Government board was that all materials
wer" 10 be paid for by the Government
as fast as they were provided. that labo
was to be paid by the Government a
short intervals, and that the prices wer
10 be held down to a fair level by Gov
eminent supervision. which would pre-
vent heavy competitive buying. Thi
took all the burden of financing from
the shoulders of the prospective builders
leaving them free to devote all thei
energies 10 turning out ships as fast q
'hey could be put together. The build
when the hull was launched and $4,000
more when II was turned over to tn
Government. This they did not feel wa
more than fair profit. and they take tn
attitude that they went into the bus
ness mainly from patriotic motives.
Great Increase Feared.
Under the system of contracts
which the builder would buy his ow
material. pay for his own labor. goin
into the open market for both. on Il
basis OF contract with the Govern
ment which would give him a lump SUI
Tor each ship completed. shipping me
and contractors feel that the cost wou
oe advanced about 25 per cent. Cnd
the impulse OF competition prices wou
nNgin TO climb and would result in d
lays in delivery OF material and clog Il
machinery Of production.
For instance" said an engineer ye
terdsy who has already contracted 4
lend for his yard and was about to b
GIN the construction OF ways. ~ / O
oered boilers on a rising market as pI
Vate individual there is no telling witt
would be able to force delivery
mem. The hoilerraker would hang
10 them 10 get as good a price as
possibly could and there would be
'o"sequent delay In turning out Z
completed ship. I understood that II
was all to be taken care Of by the Go
ernment, leaving us free to turn o
"hoie attention to actual construction.
II the lump sum contract Ia adher
10 1t will result In shipbuilders bel
forced to add perhaps 100000 to I
price OF each ship. In order to cover u
such risks as this. Otherwise the VIII,
th'hg would be gamble. 30 far as
am concerned ! am going to drop
whole thing II they stick TO their PR
ent plans. My hrm did not 90 into Il
make money. we were largely actual
py desire to help out the Governms
win our technical skill. but II they wa
VS. 10 assume all the risks In this W
we certainly shall back out"
The average price for a wooden 81
sneh as has been proposed by the sh
pins board IL s45O.000 and for q st
.a --------------