7. Delay is most damaging to production and hence the following factors are particularly significant in explaining the major causes underlying inefficient operations: (a) Current practice of many highway departments in retaining disproportionately high percentage of amount due before paying final estimate; (b) slowness in paying estimates acknowledged to be due; (c) other bidding practices and payment procedures of highway departments which place an unnecessary financial burden upon contractors.

8. If shortages of contractor capacity should appear, such shortages will in all probability be reflected on an area basis only and in most instances could be readily eliminated by certain adjustments within the highway contracting industry together with the accession of new contractors.

9. In order to obtain maximum efficiency and the resultant high level of productivity, it is essential that violent fluctuations in program volume be avoided and a sound sustaining program adopted assuring continuous work.

10. Production volume could be further increased by giving more attention to incentive values on the part of industry.

11. Projects should be offered in an assortment of sizes in order to attract the equal interest of large, intermediate, and small contractors.

CONCLUSION

After a careful study of the factors involved, Task Force No. 3 concludes that the highway contracting industry as now organized and equipped, while only operating at $4 billion level in 1954, is fully capable of satisfactorily operating at a $7.4 billion construction level, which is more capacity than required for the first expansion year. It is further concluded that through individual contractor expansions and the introduction of new capacity, including the transfer of additional capacity from other segments of the contracting industry, the stepped-up program, leveling off at $11 billion, can be efficiently and economically accomplished without adverse effect upon the construction industry as a whole.

Senator GORE. Mr. Brown, your statement is very reassuring. The committee, as you heard me indicate this morning, has from time to time given consideration to the ability of the industry to expand rapidly, and to the availability of construction facilities and materials for a greatly expanded program. It was with that questioin partly in mind that I submitted the bill to approximately double the present level of highway construction. I do not wish to draw you into any discussion or an expression of any preference of the various bills before the committee. I only say that as a preface to a question regarding your statement on page 1.

You say that: "The contractors can increase their operations from the 1954 level of $3.5 billion to over $7 billion without any substantial expansion of present organizations and equipment."

Mr. Koss, I believe, who appeared representing the contractors, gave us essentially that statement. I asked him in what period could the contracting industry double again, and I believe he gave us an estimate of from 3 to 4 years. That seems not far from the estimate which Mr. Robertson gave us this morning, beginning the first year with $6 billion, the second year $8 billion, and in the fourth year advancing the program to $11 billion expenditure.

What in your opinion could we do in the third ylear of operation? Mr. BROWN. The contracting industry is fluid. Many contractors can expand very fast. However, we are not suggesting too fast an expansion. We have presented a table of suggested progress for your consideration.

Senator GORE. You then endorse the recommendation made to the committee this morning that we approach this program progressively, in a manner not to inflate the cost of highway construction? Mr. BROWN. I do, sir.

Senator GORE. It would appear from your statement that there will be more difficulties with shortages of materials than with contractor organization and facilities.

Mr. BROWN. I am speaking only for the construction industry, that is the contractors.

Senator GORE. Your statement is very reassuring as to the availability of contracting facilities. You referred to rental equipment.. Would that be efficient equipment?

Mr. BROWN. Oh, yes. It would come from, say, contractors who did not happen to be utilizing all of their equipment at that particular time, or from the various equipment rental agencies which are located all over the country. A contractor does not necessarily have to own. every unit of equipment that he puts on the job.

Senator GORE. I was not addressing myself to the question of who owned it. I really had in mind drawing from you some response as to whether this would be good, efficient equipment or whether it would be worn out, discarded equipment brought back into use and therefore expensive to operate.

Mr. BROWN. Our experience indicates that it would be first-class equipment.

Senator GORE. Then you can assure this committee, speaking for the construction industry, that you could double the present program in the first year?

Mr. BROWN. That is right.

Senator GORE. In the second year you think you could step it up substantially. Would you give us an estimate as to that?

Mr. BROWN. I believe the first part of the chart is $8 billion, is it not?

Senator GORE. $8 billion in the second year.

Mr. BROWN. Six, eight, or ten billion dollars. So in the second year we could go to $8 billion without any trouble at all. That is the way we feel. And statistics of course bear that out.

Senator GORE. In your task force, composed of distinguished men, to what extent did you contact the industry?

Mr. BROWN. I touched on that. We sent quite an involved questionnaire to 5,000 contractors throughout the country.

Senator GORE. You come here then with very responsible estimates. And you have no hesitation in standing behind your statement? Mr. BROWN. That is right, sir; unqualifiedly.

Senator GORE. Senator Martin?

Senator MARTIN. On page 4, paragraph 7, you are speaking there about the current practice of certain highway departments not paying your estimates promptly. Do you run into much of that?

Mr. BROWN. The estimates, Senator Martin, do drag. It would help contractors who have limited borrowing capacity.

Senator MARTIN. I know that when Mr. Sam Lewis was State treasurer and I was auditor general of Pennsylvania, we put into effect a rule that if everything was correct that in 8 days a man would have his check. We did that the full time that we were in office.

The reason I am bringing that up, I can see that that means a lot because there was a time, I know, in Pennsylvania when a man had to wait several months, which was a very difficult thing for a contractor unless he had a very fine cash position. That was the first time that I heard that there was any trouble along that line.

Mr. BROWN. May I say that is not particularly applicable to Pennsylvania, but it is to other States. I am not in a position to say which States.

Senator MARTIN. I am not asking at all. What I am getting at, Mr. Chairman, is that that is one of the things that we ought to have

some assurance on.

Senator GORE. We will make a note of that and inquire about it. Senator MARTIN. That is certainly not fair to the contractor. Senator GORE. As Mr. Brown said, it impairs the ability of the con

tractors.

Senator MARTIN. They would have to have considerably more cash to operate.

That is all that I have, Mr. Chairman.

Senator GORE. Senator Case?

Senator CASE. Mr. Chairman, what would be the normal steps in launching a highway program? Suppose Congress passed a law authorizing the highway program. What would be the normal steps in getting the program underway?

Mr. BROWN. I do not know that I can quite answer that, Senator Case. I do not know exactly what you mean. I think that has been covered by our various task forces-the acquisition of rights-of-way and the preparation of plans. Others have testified as to the backlog of plans that we have now available.

Senator CASE. You mentioned acquisition of rights-of-way. Before you acquired rights-of-way you would have to determine where the road was going to go. You would have to determine where you were going to build the road?

Mr. BROWN. Yes, sir.

Senator CASE. Then acquire the rights-of-way?

Mr. BROWN. Yes, sir.

Senator CASE. Then three, get the field survey for the topography? Mr. BROWN. Yes, sir.

Senator CASE. Then fourth would be the preparation of designs and specifications?

Mr. BROWN. Yes, sir; then the bids.

Senator CASE. Then the bids, and then the contractors would be called upon to perform. How long a time would be required for those several steps?

Mr. BROWN. I think Mr. Sours has testified as to that.

Mr. SOURS. About 17 months.

Senator CASE. That is all.

Senator GORE. Senator Bush?

Senator BUSH. I have no questions. It was a very interesting presentation.

Senator GORE. Thank you, Mr. Brown.

Mr. Robertson?

Mr. ROBERTSON. Our next witness, Mr. Chairman, is the chairman of the No. 4 task force, Mr. Frederick Salditt, vice president of the Harnischfeger Corp., Milwaukee, Wis.

Senator BUSH. I will say that that is a very distinguished name in the dirt-moving business.

STATEMENT OF FREDERICK SALDITT, CHAIRMAN, TASK FORCE NO. 4, AMERICAN ROAD BUILDERS' ASSOCIATION

Mr. SALDITT. Mr. Chairman and members of the committee, I am sorely tempted to give the history of the name "Harnischfeger." Thank you very much, Senator Bush, for stating it is a very good and old name in the manufacturing industry in Milwaukee, Wis., for over 70 years.

My name is Frederick Salditt. I am vice president of Harnischfeger Corp., Milwaukee, Wis., manufacturers of electric overhead cranes, electric hoists, welding products, diesel engines, prefabricated houses, and power cranes and shovels. During 1954 I also served as president of the Construction Industry Manufacturers Association (CIMA), comprising about 180 member companies, all of which are associated with the manufacture of construction equipment and allied products. CIMA serves as the manufacturers division of the American Road Builders' Association.

Pursuant to a request from the president of the American Road Builders' Association in the month of October 1954, I assumed the chairmanship of a committee composed of competent men from the industry to investigate and report upon the ability and readiness of the construction machinery and equipment industry to meet the requirements of a 10-year, $10 billion dollar highway construction program and to evaluate pertinent problems.

The committee is comprised of :

Robert F. Boger, publisher, Engineering News-Record and Construction Methods and Equipment, New York, N. Y.

M. B. Garber, director of sales, the Thew Shovel Co., Lorain, Ohio. C. J. Haring, director of equipment sales, Westinghouse Air Brake Co., Pittsburgh, Pa.

John W. Mohler, assistant sales manager, Caterpillar Tractor Co., Peoria, Ill.

Boyd S. Oberlink, vice president, Allis-Chalmers Manufacturing Co., Milwaukee, Wis.

Julien R. Steelman, president, Koehring Co., Milwaukee, Wis.

The committee's conclusion was reached after extensive studies had been completed on the following subjects and corresponding determinations were made:

(1) The 1954 inventory of construction equipment used for highway purposes, both new construction and maintenance. That determination was made in cooperation with the Bureau of Public Roads, United States Department of Commerce, also using extensive data available in many segments of the construction industry, comprising manufacturers and contractors as well.

(2) The average use and life of equipment based on the experience of public highway departments and private contractors.

(3) The two previous determinations allowed to establish very approximately the yearly replacement requirements for construction equipment used in highway construction and maintenance at the 1954 volume level.

(4) The maximum annual production in each segment of the construction equipment industry, as previously attained, utilizing for the purpose of that determination United States Department of Commerce statistics "Facts for Industry," data available from the National

Production Authority and its predecessor and succeeding agencies, statistics available from industry associations and other sources.

(5) A realistic review of construction patterns as they existed in 1954 and as they are likely to exist in the future and determining therefrom the unused construction capacity available in construction equipment now in use for highway construction and maintenance.

(6) Yearly requirements for each type of construction machinery, giving consideration to replacements and additional equipment to carry out a total highway construction program, including the cost of right-of-way and engineering, of respectively $6 billion, $8 billion, $10 billion, and $11 billion a year.

(7) The total construction equipment population in the United States, exclusive of equipment owned by military agencies.

(8) The requirements for general construction other than highway construction and maintenance, such as heavy construction, mining, lumbering, oil field and pipeline construction, industrial material handling, the export market and all other claimants for the industry's products. That determination took into consideration the steady growth in value of new construction activity since the year 1945 and assumed that such construction activity will continue to rise in accordance with the pattern as it prevailed during the last 4 years.

(9) The approximate percentage of capacity at which the various segments of the construction equipment industry operated during the year 1954 and ways and means these industries would apply in order to increase their operations to meet the demand of an accelerated highway construction program.

Conclusion: The American construction machinery and equipment industry has, now is providing, or can provide, sufficient capacity to meet the high level needs of an expanded road building program comprising during a 10-year period a total expenditure of as much as $101 billion, and at the same time fill all normal needs of other claimants for the industry's equipment.

In support of this conclusion, Mr. Chairman, may I be permitted to file with your committee a supplemental statement of the American Road Builders' Association, also known as the Report of Task Force No. 4, Construction Machinery and Equipment, and completed on December 30, 1954.

Senator GORE. Without objection your complete statement will go into the record.

SUPPLEMENTAL STATEMENT OF AMERICAN ROAD BOILDERS' ASSOCIATION

(An evaluation of the ability and readiness of the engineering profession and the highway industry to plan, design, and execute a program to eliminate the $101 billion deficiencies in the Nation's highways in a period of 10 years.)

REPORT OF TASK FORCE NO. 4.-CONSTRUCTION MACHINERY AND EQUIPMENT F. Salditt, Chairman, vice president, Harnischfeger Corp., Milwaukee, Wis. Julien R. Steelman, president, Koehring Co., Milwaukee, Wis.

Boyd S. Oberlink, vice president, Allis Chalmers Manufacturing Co., Milwaukee, Wis.

John W. Mohler, assistant sales manager, Caterpillar Tractor Corp., Peoria, Ill. C. J. Haring, director of equipment sales, Westinghouse Air Brake Co., Pittsburgh, Pa.

M. B. Garber, director of sales, the Thew Shovel Co., Lorain, Ohio.

Robert F. Boger, publisher, Engineering News-Record and Construction Methods and Equipment, New York, N. Y.