(There was no response to the question.)

Senator MCNAMARA. What is the cement situation? Would that be unreasonable to ask at that point, Mr. Chairman?

Senator GORE. No, sir.

Senator MCNAMARA. There was a considerable shortage last year. Has that improved?

Mr. Koss. The cement industry is increasing, and has increased its capacity tremendously. Three or four years ago I had trouble getting cement. Last year it wasn't so difficult.

You had a strike in the East which made it acute, but in the area where we are working, the mills are putting in additional kilns and additional storing capacity, and there again you are in the position if they can see a continuing program, then they will expand their capacity even more.

This idea of continuity is awfully important and knowing where you are going.

Senator GORE. Can they expand enough within a reasonable cost to supply the materials for a construction program 4 times as large as the present one in a 2-year period?

Mr. Koss. I would prefer to have someone of that industry answer that. I have my own thoughts on it, but I prefer to have them do it, sir. The Bureau of Public Roads Composite Mile Price Index, based on the unit costs of highway construction with the average for 1946 equaling 100, was at 136.6 in 1952. The next year it dropped to 134.6 and in 1954 it dropped still more to 127.1.

I would like to interpolate there that from the year 1946 to 1954, the volume of highway work was increased; but in spite of or because of that increased volume, as these figures show, the unit price continued to decline.

It is kind of like selling frozen orange juice. The more you seem to make, the more you sell, the lower the price gets, and that is true in highway construction work.

Thus, while there have been continued wage increases and no declines in prices for materials and equipment, contractors' bid prices have been declining during the past 3 years through the pressure of competition.

The Bureau of Public Roads also reports that much work is being awarded below the engineers' estimates. The national monthly average of bids for Federal-aid work last year was from 9.4 percent to 13.1 percent below them.

In the industry we are proud of the fact that for many years we have been making great improvements in highway construction. Continued research; improvements in contract documents, administrative. procedures, and specifications; new machinery; new methods; and the force of competition have continuously been bringing about more efficient operations so that the public can afford the improvements it

wants.

We all recognize that a mile of highway costs more now than it did formerly because it is wider, thicker, straighter, requires more land, and there are more structures such as bridges.

But we in the industry take pride in the fact that the unit costs for grading, paving, and other operations makes the dollar invested in highway construction one of the best investments in America.

Senator GORE. What do you think would happen to these figures that you have submitted and to this trend that you have depicted thereby if we stepped up our construction program 400 percent?

Mr. Koss. You would have two things happening: first, it is that our business now would increase in capacity and production; secondly, you would have a lot of new firms entering the business.

Senator GORE. Many of them use used equipment, do they not?
Mr. Koss. That is right.

Senator GORE. Would that not make the cost larger?

Mr. Koss. That would be pretty hard to say. I would say it would depend on the operator. Some operators do a good job with old equipment; some operators with new equipment do not do such a good job; so there we are dealing with individual capacities and abilities. Senator GORE. The overall result would be what in your opinion? Mr. Koss. The overall result would be we would have increasing production from those in the business, and we would have new people in the business. In 1953, for example, there were 10,000 new contractors in the business, more new people in the business than any other time before in the country.

Senator HRUSKA. Did some others go out of business?

Mr. Koss. Yes, some dropped out during that period. The casnalty rate is not as bad as the restaurant business, but we do have that situation.

Senator GORE. If in a 2-year period, we stepped up the construction program 400 percent, what in your opinion would happen to costs?

Mr. Koss. I would say that the bid prices would not increase. I assume that the rest of the economic picture remains the same. Obviously if you are in a period of big inflation, highway costs would go up with it; but, assuming that the national economy will be the same, then your bid prices will not be greater than they are today.

Senator GORE. You think then, to summarize your statement, that the construction industry for the first year could double its capacity without increasing costs?

Mr. Koss. That is correct.

Senator GORE. You think in the second year it can step it up to 400 percent without increasing the cost?

Mr. Koss. Yes, but I would rather you would say 2 or 3 years. Senator GORE. I thought you would probably want a little more progression time.

Mr. Koss. Yes, sir.

Senator GORE. Very well, proceed.

Mr. Koss. As I have suggested previously, one of the strongest forces working toward increased efficiency in highway construction is the continued keen competition among highway contractors for the new projects coming on the market.

During 1955 and in the foreseeable future, there will be the keenest of competition in the award of highway construction projects, according to a survey conducted by our association earlier this month.

Of those responding to the survey, 81 percent expected a continued increase in competition during the next 6 months, while 19 percent expected no change in the situation which already was intense.

Tabulations of the Bureau of Public Roads show that the average number of bidders on Federal-aid projects has increased from 3.9 in

1946 to 6.7 in 1954. We would foresee no significant decrease in the number of bidders in a substantially expanded program.

I might say, gentlemen, on the jobs on which I have submitted proposals so far in 1955, that there are even more bidders per job so far this year than we had last year; so that it is apparent and has been apparent since 1946, that each year we are getting more bidders per job, which means that there are more contractors who could handle more work.

Senator GORE. Have you found any reluctance on the part of successful bidders of Federal-aid projects to comply with the provision which this committee wrote into the law last year which requires a contractor to submit an affidavit that they had not participated in collusion or other such attempts?

Mr. Koss. No, they have all signed it.

Senator GORE. Do you think it has had salutary effects?

Mr. Koss. Senator, I can only speak for myself. I have no objection to signing it, because I would have done the same thing anyway. Senator GORE. Fine. I hope they all feel the same way.

Mr. Koss. On the third point of why we believe that there will be constantly increasing efficiency during an expanded highway construction program, I would like to mention very briefly a few of the steps which the AGC is taking in cooperation with others to bring this about.

AGC chapters and the national association have been working with the American Society of Civil Engineers, the American Society for Engineering Education, and the American Association of State Highway Officials for the improvement of the education of young engineers, their early training, and their professional employment so that there will be an adequate number of well-trained engineers to design projects and to administer construction programs.

Through a national cooperative committee of the AGC and the American Association of State Highway Officials, and through local committees of State highway departments and AGC chapters, many practical steps have been taken for improvements in specifications, design, contract documents, administrative procedures, and construction practices which already are saving the public millions of dollars in highway costs.

We mention these only as samples of the benefits which will be reaped by an expanded construction program from the work which this association and many others have undertaken to improve highway construction operations in a spirit of public service.

I would like to touch briefly on reasons why highway contractors believe that those factors which might have limited an expanded highway program are being met.

The factor most generally recognized by contractors is the possible shortage of engineers to design projects and administer the construction program. As I have indicated previously, our national association, its chapters and others are taking active steps to attract greater numbers of engineers to professions in highway design, administration, and construction.

We believe that a strong stimulus to engineers entering highway departments and contracting organizations will be the assurance that there will be a large, continuing highway construction program.

I would like to interpolate right there the fact that if you are a young man and you were going into the engineering profession, I think most of us would select that phase of engineering which seemed to have the best future.

If the highway program is increased one year and cut back the next year and so forth, the young man will say that industry may have a peak year once in a while, but there is no future in it.

If we can show these younger men that there is a future in construction for the next 5 or 10 years, those young men will enter that phase of engineering.

One of our troubles right now is that a few years back they could not see the future in highway work.

As to machinery and equipment, committees of our association have discussed this with committees of manufacturers and distributors and we can foresee no problems. Even with construction at its highest level in history, production is well below capacity and manufacturers and dealers are competing keenly to make sales.

We do not wish to speak for the producers of materials, but we do not foresee any future shortages which would inpede an expanded highway construction program. The best guaranty of an adequacy of materials is the assurance that there will be a continuing highway construction program carried out on an orderly basis.

Senator GORE. What do you mean by an orderly basis?

Mr. Koss. By orderly basis I would say this: That if we had a highway program of X dollars per year, and it could be assured that that program or an increased program would be carried out for the next 5 or 10 years, then we could all make our plans accordingly, and these young engineering students would enter the highway engineering field.

Senator GORE. You recommend then that the Congress abandon the 2-year program and have a minimum of a 5-year program? Mr. Koss. That would be very helpful.

Senator GORE. Would you also suggest to this committee that we consider a setup in this program that would be a progressive one, or should we write it all into the first year and the second year and go boom?

Mr. Koss. I would say that it would be better if there was a substantial increase from the present program, say, double the present program. Then after you have doubled it then increase it each year in a lesser amount.

Senator GORE. Would you suggest doubling it for the first 2 years, and then perhaps doubling again for the next 2 years?

Mr. Koss. That would be fine.

Senator GORE. Senator McNamara.

Senator MCNAMARA. I just wanted to go back a little, and I think maybe I had better wait until he finishes his statement. Senator GORE. You had not finished your statement?

Mr. Koss. No, sir.

Senator GORE. Very well, sir. I thought you had finished.

Mr. Koss. As contractors who have practical experience in highway construction, and as taxpayers who have a direct interest in the expenditure of public funds with a maximum of economy, we would like to make the following recommendations:

1. National and State highway construction programs should be established on a continuing basis, preferably for a period as long as 10 years, and should be carried out in an orderly manner at a known rate in each of the years.

Contracting organizations, if they can count on a construction program of a known size each year, can afford to secure the trained personnel and equipment which will make for the maximum in efficiency and economical operations.

They cannot achieve the same efficiency if they must build up an organization quickly for a big program one year, and tear it down again because of a small program the following year. Continuity of work brings about increasing efficiency.

2. Steps should be taken for adequate provisions for the purchase of right-of-way well in advance of construction.

For maximum efficiency in construction land must be available before the contract is awarded. It is costly both to the public and to contractors if operations must be suspended while land is secured.

3. An expanded construction program should be administered through present channels of the Bureau of Public Roads and State highway departments.

The Bureau has served as a valuable medium for uniformity in standards to be followed by States in administering construction programs. The State highway departments are experienced in administering construction programs, and coordinate the work within the States. We believe that a departure from this traditional procedure would lead to confusion and extra expense.

4. The expanded program should be carried out under the contract method which safeguards the expenditure of public funds, with contracts awarded to the lowest responsible bidder after public advertisement.

Since 1946 about 99 percent of the $7.3 billion in Federal-aid highway construction put in place throughout the country was done by contract. This experience demonstrates the effectiveness of construction by contract.

In conclusion, I wish to give you again, on behalf of the highway contracting industry, our assurance that the industry can carry out the largest proposed expanded highway construction program promptly, economically, and with constantly increasing efficiency.

Continued improvements in the industry's operations and the continued keen competition between contractors are powerful forces which will be making the public's investment in highway construction increasinngly more valuable.

Senator GORE. The committee appreciates your willingness to give it the benefit of your practical experience. You have made a very fine witness. I will have, of course, one or two questions, and the other Senators will undoubtedly have some.

The committee has before it two bills, one-I hope this is not an unfair description-a sort of crash program on the Interstate System; the other proposes an approximate doubling of the present program on all categories of highways taken together.

What would be the effect upon the contracting industry of a crash program even on a 10-year basis, and then cutting it off, if the money were to be obligated for the following 20 years?