MANY MILLIONS SAVED BY REFUSING TO PAY EXORBITANT PRICES—"NAVY ORDER" PREVENTED EXTORTION—OVER THREE BILLION DOLLARS EXPENDED WITH NEVER A HINT OF GRAFT OR EXTRAVAGANCE—COMPETITION ADHERED TO IN WAR—FEEDING AND CLOTHING 500,000 MEN A BIG TASK, ACCOMPLISHED WITH SIGNAL SUCCESS—SAVING IN HUGE SHORE CONSTRUCTION.

The Navy spent over three billion dollars for war purpose without a suggestion of extravagance or graft. To be exact, Congress appropriated $3,692,354,324.71. Of the amount $334,360,000 were returned to the Treasury, in February, 1919, and additional sums later by the sale of excess supplies and vessels that were no longer needed.

The rule of the Department, "A dollar's worth of Navy for every dollar spent," was adhered to in war as well as in peace. Early in 1917 steel was contracted for at 2.90 for Navy ships when the price was soaring in the market. Coal and oil and copper were purchased at reasonable prices or commandeered. Manufacturers of torpedoes and smokeless powder and other makers of munitions were held to reasonable profits. Where munition or supply dealers wished more than a fair profit, a "Navy Order" was placed.

The history of the "Navy Order" should be told, for it was the weapon that saved the Navy from profiteering. Competition prevailed through the war in all purchases except where the supply was inadequate for war necessities. In some cases the exigency of war demanded commandeering orders. Such orders were sometimes required because excessive prices were quoted, but often because the only private concerns which could manufacture the article needed were under contract for all their output. If they furnished the government of their own will, they were liable to the parties who had contracted for their product. In such instances, a commandeering order was necessary both to obtain a war necessity and to protect the manufacturers.

In the naval appropriation act a provision was early inserted, drawn by Chairman Padgett, giving the power, when agreement could not be reached as to the price for something essential, to commandeer it—whether ships or land or munitions or supplies—and pay 75 per cent of the appraisement, leaving to the owner the right to contest in the courts the reasonableness of the compensation so fixed. That provision later became applicable to all war agencies of Government. It was not often invoked. The knowledge that the power was there and the declaration by the Secretary of the Navy that he would invoke it when any excessive price was demanded, and its use in some notable instances, made profiteering on the Navy not easy, and it was seldom undertaken.

"Certain coal operators are demanding excessive prices for coal," said an officer of the Supply Department when coal was necessary to bring back soldiers and munitions from Europe and carry on naval operations.

"Place a Navy Order" was the direction, and the Navy secured its coal from mines that produced Navy coal at prices that were not excessive.

At another time some oil operators, while selling oil to foreign ships, were refusing to deliver any oil to our ships on a naval order.

"What shall we do?" asked the officer in charge.

"Order the Marines to seize the oil," was the direction.

The Marines had the reputation for carrying out orders. It was not necessary for them to take the oil by force, but they were ready to do it if the oil had not been furnished otherwise.

These two cases were exceptional and they occurred after the armistice. As a rule, manufacturers and business men and bankers, as well as farmers and mechanics, showed from the moment war began that they, like our soldiers and sailors, had forgotten all selfish interests, all class interests of every kind. While the fighting men in the field gave the world a new conception of democracy, men of affairs were given the opportunity which, with few exceptions, they embraced, of showing to the world that the American's idea of his money, like his idea of his life, was something which was to be freely and ungrudgingly given for his ideals and his country whenever his country called.

One of the early supplies that had to be husbanded was coal. At a conference of coal operators held in Washington in the spring of 1917, an agreement was made for Navy coal at reasonable prices, all operators to furnish their fair proportion to meet the needs.

In 1916 a board of officers in the Navy Department was named which was an important step in preparedness. Its duties were to get together at frequent intervals, to compare notes, to place on record probable needs and then to find out definitely where the necessary supplies could be obtained, in what quantities and how soon. Its work was most helpful in securing active coÖperation all along the line and also in pointing the path—in a very modest way—toward the successful accomplishment of the task which was soon to be faced by the War Industries Board. This commodity-section plan, according to which the War Industries Board effected its own first successful internal organization, originated for naval uses in the Bureau of Supplies and Accounts, and, while the War Industries Board rendered most useful and invaluable service to the Navy, such help as was received related solely to priorities and to items of supplies and services of which there was a shortage. So long as supply exceeded or equalled demand and the usual orderly processes of business could consequently function, the Navy's long-established methods of procedure stood the test of war unchanged and unscathed.

The Navy, as did all other war agencies, leaned upon the War Industries Board which, by priority orders, saw that war material was furnished where most needed. Admiral Frank F. Fletcher was the Navy's representative on the Board. He showed the same ability in that important position which he had demonstrated when commander-in-chief of the Atlantic Fleet.

The War Industries Board, which rendered invaluable service, was made up of men who won national approval by their masterful handling of the big tasks committed to them. Its membership was: Bernard M. Baruch, chairman; Andrew Legge, vice-chairman; Robert S. Brookings, Hugh Frayne, Rear Admiral F. F. Fletcher, Brigadier General Hugh S. Johnson, Judge Edwin B. Parker, George N. Peek, J. L. Replogle, L. L. Summers; H. P. Ingels, secretary; Albert C. Ritchie, general counsel; Herbert Bayard Swope, associate member of the board, assistant to chairman. Admiral C. J. Peoples was the Navy representative on priorities.

All supplies for the Navy, except such as were regulated by priority orders, were obtained throughout the war by formal contracts entered into after the widest possible public competition in the open market, the only restriction being that—as required by Section 3722 of the Revised Statutes of the United States—no person was allowed to bid unless he was a manufacturer or regular dealer.

Throughout the war, all formalities attendant upon the opening of bids were strictly adhered to. The proposals were opened every day—sometimes far into the night—and read out publicly, each bidder having ample opportunity to know his competitors' offers and also to be sure that his own were not overlooked. Even in the few cases where military secrecy was obligatory, there was still genuine competition. The eight bidders, for instance, on the mines for the North Sea Barrage were invited to meet each other and the purchasing officials in a locked and guarded room, even these confidential bids being strictly competitive.

The idea in all business dealings by the Navy was that every single transaction—indeed every part of every transaction—must not only be right but look right.

It is scarcely to be wondered at that by following this rule and also by giving prompt inspections and making immediate payments, the Navy throughout the war maintained most cordial relations with a business public which well knew that every contract was awarded to the lowest responsible bidder whose goods were up to the standard required by specifications and fit for the use for which they were intended. It was largely for this reason that the purchasing machinery was able to expand so enormously without confusion or delay. In one day during the war the purchases amounted to over $30,000,000, as compared with $19,000,000 during the heaviest pre-war year.

Looking back at it now, the mere suggestion of waiving competition—and thereby striking at the very foundation of the system—brings a smile of incredulity. But it was no joke at the time. Scarcely had war been declared when requests came from a number of quarters for authority "to cut red tape" by doing away with competition, the argument being advanced that deliveries could thereby be expedited and important work accelerated. The idea was not easy to suppress, because its many advocates really believed they were right and insisted upon convincing superior authority. The answer was that competition was bound to speed things up rather than retard them and that, in any event, the responsible officials in Washington had given the matter due consideration and decided definitely and finally that competition must continue uninterruptedly, as to everything except where the demand so largely exceeded the supply as to compel priority orders.

The record of the commissary branch—and this applies to the hundreds of thousands of soldiers transported overseas and back as well as the half-million men within the Navy itself—was one of unqualified success from first to last and one of which the service has good reason to be proud. Never were men in uniform so well fed or was so much attention paid to a balanced and abundant ration. "Only the best (with no substitute said to be 'equally as good'), is good enough for our fighting men," was the motto of Rear Admiral Samuel McGowan, Chief of the Bureau of Supplies and Accounts, and his capable assistants, who took the greatest pride in seeing that men in the service never even knew, except by reading in the papers, that Government restriction was put upon the quantity and kind of food for civilians.

With respect to the forwarding of supplies of every description to the forces abroad, an intra-bureau order issued by Admiral McGowan in July, 1917, directed that every wish of the senior naval officer in European waters should be complied with on the same day that it became known—indeed that the discretion vested in the Chief of the Bureau of Supplies was already exercised when the needs of European forces were made known.

When the armistice was signed and demobilization followed, there was on hand a quantity of supplies in excess of prospective needs. The same supply officers, who had so capably provided for the Navy's wants during hostilities, promptly inaugurated a selling campaign; and, on the first $70,000,000 worth of surplus thus disposed of, the Government realized a net profit of more than three millions.

Throughout the entire ordeal—preparation, operation, demobilization—the Navy's business organization functioned in all its various branches with full one hundred per cent effectiveness. So much so, in fact, that an investigating sub-committee from the House Committee on Naval Affairs officially reported to Congress that the Bureau of Supplies and Accounts "has won and well deserves a nation-wide reputation for business efficiency."

In appreciation of the service rendered by Admiral McGowan, Congress passed an act authorizing his retirement earlier than the usual time prescribed. This recognition was limited in its terms, applicable only to the Paymaster General, the Surgeon General and the Chief Naval Constructor. And no special distinction was ever more deserved.

Sound business principles were adhered to when it became necessary to give navy orders and provide funds for enlargement or construction of plants. Reference has been made to the methods of securing munitions of all characters. When it was necessary to take over an optical plant, for example, expert ordnance officers carried on its operation without injury to the rights of its owners, and expert accountants kept all transactions in accordance with the most approved business practice.

Most of the great construction was done under contract, as for example the giant armor plate and projectile plant at Charleston, W. Va., and the big dry-docks at Philadelphia and at Norfolk.

When the demand for new and larger training stations and other shore establishments, which ran into hundreds of millions of dollars, made it impossible to secure fixed price contracts, the supervision of the work was so efficient in the few cost-plus contracts that the cost was less than if undertaken under contract at a fixed price. This was notably true of the two mammoth office buildings occupied by the Navy Department and certain divisions of the War Department. The story of these two buildings—the largest office structures in the world—is interesting. The need for more space by the two war departments of the Government was recognized, even after temporary modern structures had been completed. Congress was asked for relief, and plans were presented. The Navy urged upon the Chairman of the House Appropriations Committee the construction of fire-proof concrete buildings instead of the flimsy wooden fire-traps built in the hurry of the outbreak of the war. The suggestion met with favor, and the Navy was authorized to proceed with the construction of both buildings, the one for the Army as well as the one for the Navy. Under the direction of Captain A. L. Parsons, U. S. N., these structures were completed within five months at a price lower than the sums estimated by most contractors. They stand today as the best arranged office buildings in Washington, a monument to naval business methods and construction efficiency and to the wisdom of Congress.

The vast shore construction program, involving more than $300,000,000, was carried out with the greatest energy and efficiency by the Bureau of Yards and Docks, under the direction, first, of Admiral F. R. Harris and, later, of Admiral Charles W. Parks. The civil engineers, permanent and reserve, who directed shore construction in this country and in Europe, more than measured up to war demands.

The Board of Compensation, of which Admiral Washington Capps was made chairman, rendered service beyond computation in protecting the government in all "Navy order" contracts. Millions of dollars were saved by the thoroughness and efficiency with which this important board performed its manifold and difficult duties.

The only criticism of the Navy voiced during the war was that it was too insistent upon holding on to peace-time competition and economies. One officer complained that I "held up an order for torpedoes." He was correct. It was held up long enough to secure a conference with the makers. By a few days' delay on one order, $5,000,000 was saved, and we always had an abundant supply. In one order for shells $200,000 was saved. Such instances could be multiplied many times. Insistence upon competition, where possible, and strict inspection in other cases, enabled the Navy to close the war with the assurance that naval expenditures were as free from extravagance as they were untainted by graft or favoritism.