tion on local conditions which we felt would be of interest to this committee.

Based on the reports received, we wish to submit the following:

1. CONTRACTORS' CAPACITY

The highway construction industry has the capacity to carry out promptly, efficiently, and economically the program under consideration by this committee. Replies received on this point were unani

mous.

In no area of the Nation is any delay of any type on highway construction caused by the contracting industry. As a matter of record, our survey revealed that, on a nationwide basis, highway contractors are equipped to handle at least twice their current volume of work. That capacity can, if necessary, be greatly expanded.

2. AVAILABILITY OF MATERIALS AND EQUIPMENT

Aside from a few spot shortages of structural steel, materials and equipment required for highway construction are readily available. Cement is no longer a problem, and the equipment supply is adequate.

Virtually all State highway departments are either specifying the use of prestressed concrete or allowing it to be bid as an alternate wherever possible to alleviate any possible delay due to shortages of steel for construction of bridges and other structures incident to highway construction.

3. CONTRACTORS' BID PRICES

The very keen competition among highway contractors during the past year has kept bid prices for construction work at a most economical level. The financial benefits derived from this competition under the contract method of construction will certainly permit many more miles of highways to be constructed from funds available.

We are pleased to be able to say that highway construction, today, is probably the best buy the public receives for its tax money. Cooperation between highway officials and our association, together with the very vigorous efforts of the Bureau of Public Roads in demanding open competitive bidding in all States, have been highly instrumental in providing contracting conditions under which public funds can be utilized so economically.

Figures released last week by Bertram D. Tallamy, Federal Highway Administrator, show the index of average bid prices for construction on Federal-aid highway systems increased only four-tenths of 1 percent for the fourth quarter of 1957 as compared to the previous quarter. This almost negligible increase in view of the continuing and much greater rises in cost of the major construction componentsmaterials, equipment, and labor-give a most favorable indication of the efficiency and ability of the highway contractor to do the job. The same index of bid prices gives a 1.9 percent increase in composite mile cost from the last quarter to the same period a year ago.

Compared to the some 4.5 percent increase in labor wage rates (excluding fringe benefits and the effects of certain restrictive practices of some unions) the nearly 8 percent increase in cost of construction machinery, and about a 6 percent rise in the cost of steel and cement

over the same period of time, the 1.9 percent construction cost rise is considered remarkable, and again a forceful example of the ability of the construction industry to meet the challenge of the great public works program which this committee is now studying.

In view of the 1.9 percent construction cost increase, together with the rise in price of real estate for right-of-way and other costs in support of construction work, it again seems only reasonable to require a modest $25 million increase in Federal-aid funds in order to continue at least as much improvement in primary and secondary road systems as is currently being undertaken. The $25 million increase in authorization for both fiscal years 1960 and 1961 would seem to be adequate under present competitive conditions. In many regions of the country advertised projects have recently received from 15 to 20 bids, giving a strong indication of the economical trend within the contracting industry. This trend should be helpful in reducing the influence of announced future prices rises for steel and other construction materials in the years ahead.

4. APPORTION MENT OF FUNDS FOR ABC SYSTEMS

We would like to bring to the attention of this committee the matter of scheduling of apportionments to the States by the Bureau of Public Roads. For the past several years, Federal-aid highway funds have been apportioned on about the 1st of August, permitting award of many construction contracts for the ABC systems at an early date. According to present planning by the Bureau of Public Roads, the next apportionment, that for fiscal year 1960, will be made about next January. The 5 months' delay in apportionment, together with the winter season shutdown of construction in many States, will have the effect of deferring a very sizable amount of highway improvements. A recent statement by Bertram D. Tallamy, Federal Highway Administrator, before the Senate Subcommittee on Public Roads, substantiates this situation as follows:

After the 1959 fiscal year funds have been fully obligated in any State, it will be necessary to defer approval for advertising additional projects in that State until 1960 fiscal year funds are apportioned, except for advance construction of interstate projects financed by State funds as provided in section 108 (h) of the 1956 act. The date of apportionment of 1960 funds and the amount of interstate funds that can be apportioned for the fiscal year 1960 will be controlled by the estimate of revenues accruing to the highway trust fund as provided by section 209 (g) of the 1956 act.

In view of the financial shortages now reflected by the new cost estimate for completing construction of the Interstate System, it does not, under these circumstances, seem appropriate to defer construction on the primary and secondary systems for the apparent purpose of making all apportionments on the same date. While we certainly feel that construction of the Interstate System should proceed on schedule, it does seem advisable at this time to separate the system of apportionments to allow continued orderly construction of the ABC systems. We hope that the House Public Works Committee will give this matter serious consideration.

With the committee's consent, we would like to make several general observations pertinent to the expanded program being studied by the committee:

(a) We agree with the bill introduced by Representative Fallon which would restrict the use of the moneys in the highway trust fund for administrative expenses to the Bureau of Public Roads.

(b) We support the bills introduced in both the House and Senate, including the one introduced by Mr. Schwengel, of this committee, to amend section 13 of the Federal Highway Act to permit reimbursement to States by the Bureau of Public Roads for materials delivered to the job site. This will serve to reduce the contractors' credit requirements and will result in lower bid prices in many instances. It will also help to reduce the funding problems of many State highway departments. When the committee conducts hearings on this bill we will appreciate the opportunity of submitting tangible evidence of these facts.

(e) We reaffirm our strong belief that the 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.

(d) We repeat our long-standing opposition to any diversion of highway funds.

CONCLUSION

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

Continued improvements in the industry's operations and the continued keen competition between contractors and powerful forces which serve to make the public's investment in highway construction increasingly more valuable.

That, Mr. Chairman and gentlemen, concludes our presentation. Mr. FALLON. Mr. Miller, on behalf of the committee I want to thank you for a very fine statement.

Mr. Dempsey?

Mr. DEMPSEY. No questions, Mr. Chairman, but I think it is a very splendid statement and I am happy that he has called attention to the fact that the 1960 funds will set your construction back nearly a year if they are not allocated as they have been in the past few years.

Mr. GEORGE. Is it not possible when we write the new bill that we can say that the moneys shall be apportioned at a certain time? Do we not have control over those authorizations?

Mr. FALLON. We do. I think the Congress can control the time when the money should be apportioned.

Mr. GEORGE. There are a lot of States which can operate through the winter months on certain type of construction if their money is available, and if instead of getting it July 1 they have to wait until January, they lose that entire construction period. That means they have to lay off their crews and disassemble their force and gather their machinery and return it to their home base, and they have these moving costs involved.

It occurs to me it would be a shortshighted policy for the members of this committee to allow that condition to prevail. We can take it up, though, when we write the bill.

Mr. BECKER. It would seen to me on the same question, Mr. Chairman, the allocation of funds at the present time must have something

to do with the income and revenue of the Government, and with the other expenditures which are involved, because the money we are talking about, the ABC money, has to do with the funds coming out of our general revenue and not with the funds coming out of the money allocated to the trust fund.

Mr. FALLON. No. All agency money comes out of the trust fund. Mr. BECKER. All agency money? I thought we said yesterday it was not. Oh, that was forest highways. But still the apportionments will have to do with the incoming money at given times in the year.

One point I would like to make is, everybody is talking about this and I know my good friend, Governor Dempsey, said that the highway program may be delayed as much as 1 year if we do not have this. It seems to me with the demands that are being made on spending by the Government in various other fields which are vitally essential at this time, that we should take those things into consideration.

As I drive throughout the country I note that we do need roads, and I certainly have been backing up this program from the beginning, along with the rest of the committee, but I think there are times when we have to slow down some spending somewhere if we have to do considerable spending in other directions which are more vital and essential at a given time.

I am getting very much concerned as to the total amount of money we are spending in this country and how much our people are going to be able to absorb.

I am perfectly willing, I frankly say here, that if we have to cut down $25 million a year for a couple of years, then I am perfectly satisfied to do it, even though our road program generally overall is delayed for 1 year; but I do think somewhere we have to give just a little just a little to prevent our spending from going out of control and getting to the point where we may have to increase taxes on the people, which I think they can so ill afford, because we know that we come to a point in our economy where taxes can destroy it rather than help it.

I think we are all aware of the fact that the people can spend their own money in their own pockets at any time better than the Government can spend it.

I want to make it perfectly clear on the record now

Mr. DEMPSEY. Will the gentleman yield?

Mr. BECKER. Yes.

Mr. DEMPSEY. The ABC funds have priority over the Interstate System funds. First they get their allocation and then the money that is left over goes to the Interstate System. I am quite familiar with the situation of the contractors. They have bought many millions of dollars' worth of new equipment which is paid for on a time basis. If the ABC money is held up for the time it is indicated it will be, then there is going to be quite a difference in the situation

among

the contractors.

Mr. BECKER. I agree with the gentleman.

Mr. DEMPSEY. But this has nothing to do with the expenditures you are talking about.

Mr. BECKER. But it has to do with the overall spending.

Mr. DEMPSEY. No.

Mr. BECKER. It has to do with the overall spending of the income of the Government under the present situation. I have read and the gentleman here has explained that according to his figures the increases in the cost estimates have not been so great. Is that correct? Mr. MILLER. That is correct.

Mr. BECKER. Yet I have read in hearings before the Senate and statements which were made by the Bureau of Public Roads that our overall picture on the Interstate System is that it is not going to be finished in 13 years, but it may be 17 years, because the cost estimates made way back in 1954 have so vastly increased since that time. Therefore our money is going to have to be spread over more years, and also we will have to get more money. That is why I say now we should not push ahead so fast in using money which may be more vitally needed someplace else, because if we do we may get to the point where we have to increase taxes in order to carry out this program, when we can finish it at a later time.

Mr. FALLON. The money that is in the trust fund has no bearing on the general taxes. If the money is there and is not used, the money is not being invested in something which I think is the greatest thing we can invest our money in, namely, improving our road system. The money is there lying idle and becoming stagnant. Why cannot the money be advanced or kept at the point where there is a stable distribution just like there is now? It has no effect on the general tax levy which might be necessary, as you say. It may be necessary at some time if you look to new revenue to complete the system, but it has no bearing on the ABC system, because that money comes out first and what is left over goes to the Interstate System.

Mr. BECKER. That is quite true, but somewhere along the line we have been informed on this point. I am sorry I have not been able to sit in at the complete hearings here. I was indignant about this yesterday because of the cutting off of the New York State funds and cutting down of the mileage in New York State, which may be affected. Either the funds are not ready for apportionment or they are not in the trust fund to the extent needed for these allocations to be made at a given time. I am looking into it right now and the members of the New York delegation are, and we are having a meeting with the Bureau of Public Roads to get the answer to it.

If the money is lying there, Mr. Chairman, and if it is there then I can see no reason why an apportionment should not be made at an early date to give the contractors a chance to bid.

Mr. FALLON. I do not doubt that there will be a shortage, but it will not be a shortage in the first 900 million or 925 million.

Mr. SCHERER. The shortage will be in the Interstate System. That will suffer.

Mr. FALLON. We are talking only about the ABC funds now.

Mr. BECKER. I understand. It all comes out of the trust fund except for the forest roads and highways.

Mr. FALLON. Do you have any other questions, Mr. Scherer?

Mr. SCHERER. Not of this witness. However, when he is finished I would like to ask General Prentiss 1 or 2 more questions.

Mr. FALLON. Mr. Schwengel.

Mr. SCHWENGEL. Yes, I have an observation to make.

I want to say I appreciate this very fine statement and I want sort of to underscore and call attention of the members of the committee to