George W. Goethals to Woodrow Wilson

June 11, 1917.
It is nearly two months since I took hold of the shipbuilding project at your request. At that time, I acquainted you with the views which I held, and you learned further concerning them from Colonel House. Since then, I have received your permission, through the United States Shipping Board, to supplement the number of wooden ships that it is possible to build by the construction of steel ships, which I hoped would enable us to secure the total tonnage provided by the program of 3,000,000 tons in eighteen months.
In the time which has elapsed, a central organization has been created, and decentralization of the work has been effected by dividing the country into districts, placing a man experienced in ship construction in charge of each, and providing in addition such local assistance as will enable all of the shipbuilding work in his section or district to be satisfactorily handled. These organizations have been completed.
Generally speaking the art of wooden shipbuilding is a thing of the past. Those constructed of late years have been for the most part schooners, with auxiliary power, though within the past year or two wooden ship construction has revived to some extent. Conditions surrounding our problem, however, are peculiar, for in order to have a fair chance against a submarine, the speed must be not less than 10½ knots, with reserve power for speeding up an additional knot or so through the danger zone, thus necessitating a much stronger construction than is required for sailing vessels. It was also necessary that the plan adopted should be for the largest vessel that can be safely and economically constructed, because of the fuel problem, and the difficulty of procuring requisite crews, as well as the limit to the output of machinery and equipment. By standardization, greater results can be accomplished in a shorter time.
The preparation of the plans and specifications for the standard type of ship to meet the requirements took longer than I had anticipated, due partly to the fact that the representative of the British Admiralty desired the standard plans to conform with the ideas obtained from recent experience with the submarines. The plans and specifications for the standard wooden ships to be constructed on the coasts were completed and issued to prospective bidders on May 21. Those for ships to be constructed on the Lakes, which must be smaller, being limited to the dimensions of the Welland Canal, will, I expect, be ready for issue this week.
Pending the completion of the standard plans and specifications, time being an essential element, contracts were made with those builders of wooden ships who had already constructed vessels of about the size contemplated, and whose own plans and specifications were generally satisfactory to our naval architect, or could be made so. For the reasons stated hereinbefore, no ships were considered of less than 3000 tons deadweight carrying capacity. While numerous general designs were presented, with applicants promising quick construction, investigation developed defects which did not warrant their adoption for overseas traffic.
A general survey of existing shipyards indicated very little hope of getting much assistance, unless the construction of steel ships already on the ways could be pushed to permit launching at earlier dates than the contracts provided, or unless extensions could be made to the yards. Because of the scarcity of labor, there is apparently very little to be gained by the latter method. The “fabricated” ship, using structural steel employed in bridges and buildings, together with the forces engaged thereon, held out possibilities of increasing the tonnage, and though the representatives of the shipyards did not look upon the idea with favor at first, the sentiment has changed, so that three of them are now desirous of cooperating in this method of securing tonnage. Mr. Sutphen, of the Submarine Boat Corporation, who made a record in completing submarine chasers for the British Admiralty, cooperating with Mr. Worden of the Lackawanna Bridge Company, took hold of the proposition, and, after investigation, they have become so enthusiastic over the prospect that they are ready and anxious to begin on a program by which they anticipate producing two hundred 5000-ton steel ships, complete in all details, in eighteen months. The idea and enthusiasm have so spread that the Chester Shipbuilding Company and the New York Shipbuilding Company also have become interested. The first named company expects to be able to turn out some 600,000 tons in the eighteen months period and the latter in excess of 1,000,000 tons in the same period. A new company, which is to organize at Charleston, S. C., for erecting material to be furnished by the Birmingham mills, hopes to supply 350,000 tons. If the Emergency Fleet Corporation assists the Maryland Shipbuilding Company in extending its facilities, which I am willing to consider favorably when the money becomes available, the foregoing tonnage will be still further increased.
On the Great Lakes, the American Shipbuilding Company stands ready to contract with us for 15 ships to be delivered before navigation closes, each between 3000 and 4000 tons deadweight carrying capacity, all of steel, provided it can get the material and start at an early date. There are also other concerns on the Lakes which will undertake similar construction for us. These latter vessels, while relatively small, are good cargo carriers and are the largest that can make the transit of the Welland Canal.
Summing up the situation, therefore, I feel very much encouraged, and anticipate, even assuming that there be considerable shrinkage in hoped for tonnage by the "fabrication” method, that we will be able to go well beyond the 3,000,000 tons in the eighteen months period, if the money is available.
In order to secure funds to carry out the project, it was necessary to have something fixed and definite to present to the committees of Congress, and I accordingly proposed the program of 3,000,000 tons in eighteen months, including both wood and steel, estimating that $500,000,000. would be required.
Of this tonnage, I hope that we may be able to secure wooden ships to the amount of 1,000,000 tons, but I am not so optimistic of this because of the change of policy concerning contracts. I did not regard with favor the idea of building on a cost-plus percentage basis. There are few yards capable of undertaking the work, and the security against loss, and the certainty of profit no matter what the cost would lead many to undertake contracts, who were not sufficiently skilled, and who lacked other qualifications. While the outstanding contracts thus made might be sufficient to cover the tonnage desired, there would be no certainty of producing the ships; no possibility of securing the greatest efficiency by employing the services of the limited number of shipwrights; and no way of limiting the total cost to a reasonable amount, or the time of completion to eighteen months. With the desire of getting greater speed and economy, the policy was therefore changed from a cost-plus percentage basis to a cost plus a fixed fee basis.Commissioner Brent, of the Shipping Board, after a tour of the Pacific Coast in company with our naval architects who are now engaged in that section of the country, looked with strong disfavor on this method, and the lump-sum basis was thereupon adopted for that coast in lieu of the cost-plus basis. This led to charges being made of discrimination in favor of the Atlantic and Gulf coasts, and, finally, as the result of the hearings before the House Committee on Appropriations, where the whole matter was threshed out, the cost-plus fee basis was eliminated and the lump-sum form of contract was adopted for all sections of the country, for both wood and steel ships. With the varying labor conditions and the constantly increasing cost of materials, it was felt that the Government, or in this instance, the Corporation, should assume contingencies arising from fluctuating prices of labor and material, which in these times cannot be estimated in advance, so an arrangement has been made whereby the Corporation agrees to take care of any increase in labor and material above the rates used by the bidder in the preparation of his proposal. This eliminated the more important contingencies from this form of contract, and therefore no hardship is imposed on those who have the proper organizations to carry the work through to successful completion. In the case of wooden ships, whenever necessary, the Corporation is willing to pay for the ways and the machinery required to properly equip the yard.
The completion of steel ships on the ways under private contracts is impeded to some extent at the present time by the inability to secure materials in time to enable the existing shipyards to work to their full capacity, and for the most part no provision is made in contracts for these ships for overtime work. A large quantity of steel will be required, and arrangements with the steel companies whereby they will cooperate to secure the necessary material and distribute it to the various ship plants in time to meet requirements have been effected. The Railroad Committee will assist in its transportation.Because of the existing conditions, and in order to expedite the work now on the ways, there seems but one course open – consider the shipyards as component parts of a whole and distribute material where and when it is needed, thus avoiding overstocking one plant to the detriment of another, endeavoring to keep all properly supplied through coordination and cooperation. This will necessitate the Corporation taking over all commercial ships that are now on the ways. For the purpose of ascertaining the value of such ships, arrangements are in contemplation for the appointment of an Appraisal Committee, on which the shipping interests will have representation.
To date, we have contracted for 104 ships, of which 18 are steel; 32 are composite (steel ribs with wood sheathing); 30 are wood to be delivered complete by the contractor, and 24 are wood hulls, for which the Corporation is to supply the necessary machinery and equipment, giving a total tonnage (deadweight carrying capacity) of 497,400 tons. In addition, contracts are ready for signature for 10 steel ships and 20 wooden hulls. The aggregate cost of all work thus far pledged approaches $80,000,000. The sum of money thus far available is only $50,000,000., and I adhered to this limit prior to the hearings held by the Committee on Appropriations in order that I might truthfully say that I had not obligated the United States to a greater amount than already authorized; but subsequent to these hearings, in view of the extraordinary emergency confronting the country, I took the responsibility, in order to avoid delaying construction, to accept proposals for ships of wood and steel, in limited numbers, in excess of the $50,000,000. limit, and I am now awaiting additional funds before launching forth into the construction of a greater number of steel units, in accordance with the “fabricated” idea, which must be combined into a small number of larger contracts.Various estimates have been made as to the time within which wooden and steel ships can be constructed. Based on contracts which have been made for wooden and steel ships with companies that have constructed such ships and whose plans have been accepted, each company being fully equipped and ready to begin work, I find that the shortest time within which the wooden ship complete (3500 tons) is to be delivered is eight months, whereas the shortest time for the steel ship (8800 tons) is five months. The shortest time for the delivery of a wooden hull is seven months, and it is estimated it will require two months to complete the erection of the machinery on wooden hulls. It is also estimated it will require from 60 to 90 days to equip a yard to undertake the construction of wooden hulls.
As regards cost, based on the contracts already let, complete wooden ships average $143. per ton deadweight carrying capacity, while the steel ships contracted for average $160. per ton deadweight carrying capacity, with steel plates at 4¼ cents per pound and steel shapes at 3¾ cents per pound. There is of course no comparison as to the commercial value of the wooden and steel ships.
I trust that I have not gone into the matter in too much detail; but as I am in hopes that the appropriation bill may soon become a law, I felt desirous of acquainting you with the shipbuilding program that has been arranged, so that if it is not in accordance with your wishes, I can make any changes in it that you desire.