NATIONAL HIGHWAY PROGRAM MONDAY, FEBRUARY 28, 1955 UNITED STATES SENATE, COMMITTEE ON PUBLIC WORKS, Washington, D. C. The subcommittee met at 10: 15 a. m., in room 412, Senate Office Building, Senator Albert Gore presiding. Present: Senators Gore, Symington, Thurmond, McNamara, Neuberger, and Bush. Also present: Senator Hruska. Senator GORE. The committee will come to order. Our first witness this morning will be Mr George Koss of the Associated General Contractors. Mr. Koss, I believe if you will sit over here, it will be easier for everybody. Mr. Koss. Right here, sir? Senator GORE. Yes, sir; that will be fine. Off the record. (Thereupon, there was a discussion off the record.) STATEMENT OF GEORGE C. KOSS, PRESIDENT-ELECT OF THE ASSOCIATED GENERAL CONTRACTORS OF AMERICA Mr Koss. Mr. Chairman and members of the committee, my name is George C. Koss, president of the Koss Construction Co. of Des Moines, Iowa. Our firm specializes in highway paving in the Mid west area. Also I am president-elect of the Associated General Contractors of America, scheduled to take office at the close of the association's 36th annual convention, which opens in New Orleans 2 weeks from today, and it is in that capacity that I appear before you today. Our association represents more than 6,500 of the Nation's leading general contractors who each year execute most of the contract construction performed throughout the United States. Of these companies more than 2,700 report that they engage in highway construction either exclusively or as a part of their work, and more than 2,300 report that they engage in what we refer to as heavy construction which would include phases of highway construction such as bridge building. There are more than 120 local associations affiliated with the national association. Many of these are statewide associations of highway and heavy construction contractors, which work closely with their State highway departments for improvements in highway con struction. Our association consistently has taken the position that it is the function of Congress, acting upon the recommendations of appropriate Federal, State, and local highway and other governmental officials, to determine the size and kind of the Federal highway construction program. For that reason we are directing our presentation to facts about highway construction on which highway contractors can testify from personal knowledge in our own businesses. The principal point on which highway contractors throughout the country can give assurance to the Congress and the public is that the highway contracting industry has the capacity to carry out a greatly expanded highway construction program promptly, efficiently, economically, and in such a manner that the public will receive an increasing value for its investment in highway construction. The remainder of my testimony will be devoted to explaining why highway contractors know that the industry has the capacity to handle an expanded construction program. But I want to emphasize that we can give you assurance that each year that an expanded and continuing highway construction program is carried out in an orderly manner, the public will receive greater value for its investment. Let me start by reporting to you that construction has become the Nation's largest single productive activity. Last year the amount of new construction of all kinds put in place was valued at more than $37 billion. Maintenance and repair operations brought the total volume of construction to $52 billion. This represented about 15 percent of the gross national product, and the industry directly and indirectly provided jobs for 17 percent of the gainfully employed. All types of new highway, road and street construction last year were valued at only $3.5 billion, or less than 10 percent of the total volume of new construction of all kinds. According to a survey conducted by our association earlier this month there are more contractors with excess capacity competing more vigorously for the work coming on the market than at any time in the memory of most of those in the industry. Even though the industry is operating at the highest level in history, members of the association reported in the survey that contractors throughout the country have excess capacity and are engaging in the keenest of competition for a share of the new projects for which contracts are being awarded. For the reason that these conditions prevail during the year which will be the 10th consective one in which the industry will establish a new all-time record for the amount of construction put in place, we believe that highway contractors can give assurance to you that they will have the capacity to carry out an expanded highway construction program promptly and with increasing efficiency. Senator BUSH. This association has to do with general contractors, regardless of whether they are road builders or whatever; it is a broad organization, is it not? Mr. Koss. Senator, we have the national organization, and we have 120 local chapters. The association is carried out through three divisions: 1 for highway construction; 1 for building construction; and 1 for heavy construction work. So, we cover all phases of construc tion work, and roughly over a third of our members are engaged in highway work. Senator BUSH. So the $37 billion figure that you mentioned just a moment ago applies to all types of construction, and not just to highway construction, is that correct? Mr. Koss. That is correct. Senator BUSH. All right. Senator GORE. In that connection, as to this matter of the contractors' capacity, I want you to put emphasis on that because, as I see it, the need for additional highways of all categories is almost unlimited. I think we have two limiting factors, which this committee must consider: One is the amount which we can afford to spend on highways, considering the demands, and needs for all categories; and second, the amount of the demand we can place upon contracting equipment and facilities and building materials without inflating the price to the point where we will be given less roads for our dollars; and it is to that point that I would like for you to direct your testimony. Mr. Foss. Yes, sir. Last fall when the President's Advisory Committee on a National Highway Program was holding hearings to secure information for its report, the A. G. C. conducted a survey of its highway chapters on the capacity of their members to handle an expanded volume of work in 2 years and in 5 years. The majority of chapters reported that their members could double the volume of their work in 2 years. Some responded that the contractors could immediately double their volume with the supervisory personnel and equipment already at hand. As to increase of capacity in 5 years, the majority replied that the contractors operating in the States could-if they knew that a continuing program would be carried out increase their capacity to 400 percent of the present. Many contractors who now do not normally engage in highway construction also have pointed out that if there is a significant increase in this type of construction they will enter the field. These are some of the reasons why those of us in the industry have no question in our minds of the ability of the highway contracting industry to expand its capacity quickly, and to handle an increasing volume of highway construction with increasing efficiency. Senator HRUSKA. When you speak of increasing your capacity, doubling it, and then probably increasing it to 400 percent, does that take into account the materials available as well as services in that connection? Mr. Koss. That would be true. However, my statement referred only to the contractors' own plants. That is his equipment and his personnel. The material situation I will touch on a little later. Senator GORE. I don't mean to interrupt you, but let us just make this informal and get all the information we can. Senator HRUSKA. Surely. Senator GORE. When you say increase the capacity 400 percent, I know you are referring to a great demand over a 5-year period. How much could you increase it next year and the second year? Mr. Koss. Right at the moment, I would say that the majority of our highway contractors are operating at about half of their capacity; that is, at the present time. I think that most highway contractors are suffering from lack of work rather than having too much; so I would say that we could handle twice the work that we are now handling. Senator GORE. Without inflating the price? Mr. Koss. That is right. Senator GORE. What about the following year? How much do you think it could be stepped up the second year? Mr. Koss. The second year it could be increased, and by the time that we reach the five years, we could quadruple it. The reason that the continuing program comes in is that, for example, my own case, I am a highway contractor. If I know that there is a market for my activity, my organization, 2, 3, 4 or 5 years ahead, I will go out and make the necessary expenditure; but if there is no assurance that there is a continuing program, I am going to become conservative and say, I know I can use it this year, but next year the program may be cut in half and there I am sitting with all that equipment. I am taking a risk; I am not assured of any future market. Senator GORE. If you were to expand with an assured need and an opportunity for your firm to engage in construction, you would go out and buy bulldozers and draglines, trucks and mixers, and other equipment. Mr. Koss. That is right. Senator GORE. Suppose almost all other road contractors are doing the same thing. What about the availability of heavy construction equipment. Mr. Koss. Right at the moment, and I think this will continue to be correct, the heavy equipment business is almost like the automobile business. There are just a lot more machines being produced than are being readily sold. Senator BUSH. Do you think it is an anticipation of the possibilities implicit in this legislation? Mr. Koss. Like every other manufacturer, whether it is washing machines or TV sets, they can turn their equipment out, they can get their materials, and it is very, very competitive. Senator GORE. They are all optimistic and produce more than they have sold and expect to put the pressure on the salesmen to get them moving. Mr. Koss. Possibly. Senator GORE. You have said that the construction industry could double its capacity in the first year. Mr. Koss. Yes, and available this coming summer I think that our industry could handle about twice the amount of work that we did. last year. Senator GORE. You then gave as an estimate that at the end of the fifth year, you could increase about 400 percent? Mr. Koss. Yes, that is right. Senator GORE. What about the second year and the third year? Mr. Koss. I would say that in the second and the third year, we would probably contemplate up to 400 percent in that time. We probably could, because the equipment is available. Senator GORE. Do you mean to say that you could put together your organization in the second and third year to increase construction capacity 400 percent? Mr. Koss. That is right. Senator GORE. What you mean to say is that you could put together your organization, and could handle the construction work if you could get the equipment? Mr. Koss. I do not think there is any question about getting the equipment. I am very sincere on that. Senator GORE. Do you mean to give us the impression that if the whole highway construction industry undertook in 2 years to increase their capacity by 4 times, that there would be no difficulty in obtaining equipment you needed? Mr. Koss That is my opinion; yes, sir. Senator GORE. Do not hesitate to ask any questions that you wish, Senator. We are just having an informal session. Senator MCNAMARA. I will. Mr. Koss. Previously you have heard me refer to the fact that an expanding highway construction program can be carried out with increased efficiency so that the public continuously will receive greater value for its investment in highway construction. I have said that for three principal reasons: 1. Highway costs already are low in comparison with the cost of other services and commodities. 2. The keenest of competition now is prevailing in highway construction and will continue to prevail, which means that contractors will have to continue to improve on their efficiency in order to stay in business. 3. The AGC and other segments of the highway construction industry and Federal and State highway departments are cooperating in practical means of making highway construction more economical. Highway construction costs are already low, and have been declining since 1952, and I would like to go into that subject for just a moment, sir. Senator GORE. Just a moment. I do not believe that we have thus far scheduled anyone to testify before this committee to give us an accurate estimate of the availability of heavy construction equipment. Would you be able to suggest, or would someone in the room be able to suggest parties, who could give us the facts on that? Mr. Koss. Yes, we can get that information for you. Senator GORE. Will you confer with some of your colleagues after the meeting and give that to me or the clerk of the committee, an indication as to how we might get that information. I think one of the real limiting factors is this: we do not want to overdo it so that the taxpayers will not get their full value in roads for their money. We need some really reliable information on that point. Mr. Koss. I can get that information for you, sir. Senator GORE. Thank you. Mr. Koss. I would say, sir, as a buyer of construction equipment, that there certainly is a lot of it on the market for sale. To give you an example, without delaying this, the problem of used construction equipment is almost as acute as the problem of disposing of used cars. You have probably driven by dealers who handle heavy equipment, and the yards were full of used equipment. Senator GORE. Would you say the problem of using it is analogous, too? |