(d) By une relinquishment of disability pensions due officers, seamen, and marines during continuance in hospital (R. S. sec. 4813); (e) By forfeitures on account of desertion (naval appropriation act, June 7, 1900);

(f) By proceeds of sale of naval hospital fund property, when so authorized, as by acts of June 12, 1858, and July 2, 1890, when the naval hospital fund was reimbursed for land transferred and sold in the sums of $50,000 and $92,000 at Chelsea and Brooklyn, respectively.

8-92. The naval hospital fund may be used for the purchase of hospital sites and the construction of hospital buildings thereon, and for the maintenance, repair, and operation of hospitals; it is under the control of the Secretary of the Navy as sole trustee, but is administered by the Bureau of Medicine and Surgery. By the latter, allotments are made to the Bureau of Yards and Docks for public works, public utilities, or major repairs thereto. By act of March 4, 1913, it is provided that thereafter no sites shall be procured, or hospital buildings erected, or extensions to existing hospitals made, unless thereafter authorized by Congress. This provides a restriction of the expenditure of the naval hospital fund.

8-93. Retirement fund deductions in the annual appropriations "Maintenance, Bureau of Yards and Docks," and "Contingent, Bureau of Yards and Docks," are made at the beginning of the fiscal year in a lump sum for each appropriation because the Treasury Department insists upon such advance transfer to the retirement fund. Allotments from these appropriations exclude the retirement fund, and reports of expenditures thereunder are therefore to be exclusive of the 2 per cent deduction on account of such fund. In the case of specific appropriations for public works, the retirement fund deductions can not be made at the beginning of a year because the expenditures for civil employees can not be estimated in advance, owing to the fact that frequently the entire appropriation may be expended under contract, or only a part of it may be expended in the fiscal year when it becomes available. Transfers to the Treasury Department on account of the retirement fund, in the case of public works appropriations, are therefore made after the amounts due for services of civilian employees who come within the retirement provisions have actually been paid. Therefore, in the case of expenditure reports pertaining to these appropriations, deductions for the retirement fund must be stated separately.

CHAPTER 9.

COST OF WORK.

9-01. Lowest cost of work represents least draft on capital resources. The bureau here directs attention to the importance of considering, in advance of expenditures, the cost of work as represented by the amount of labor, material, supervision, and other charges incident thereto, necessary to accomplish any given object. A combined low cost of construction, maintenance, and operation is to be desired as involving the least expenditure of appropriations or the least draft upon the capital resources of the Nation.

9-02. Definition of cost of work. The cost of work in accordance with the usually accepted understanding of the term is a measure in money of the value of material, labor, and supervision applied to produce the result desired; that is, it is the sum of the purchase price of the materials, plus the wages paid to labor, plus the amount of money paid for supervision and other charges incident thereto. There are many circumstances in which money, or value as expressed in money, is not directly taken into account or is overlooked in determining cost of work. It is more proper to state that cost of work is a measure of the amount of labor, material, and supervision applied. These elements of cost have a value even if they do not involve a measure of their value in money. Materials which do not involve a charge against any appropriation nevertheless have value, which is in no way reduced because methods of bookkeeping have caused their value in money to be expended on the books at some prior time. Labor, particularly, has value even when its cost in money is not charged to a specific object. This applies in the case of labor performed by enlisted personnel or by workers who are paid from current funds not chargeable to a specific job, such as janitors and those maintained on regular rolls for yard cleaning, transportation, and other general purposes. The same principle holds as to supervision and the services of draftsmen, inspectors, and other technical employees. Such labor, material, and supervision as are here indicated, though not appearing in the recorded cost, nevertheless contribute to the real cost of work, exactly as if paid for in money and charged to the project in question.

9-03. Importance of restricting naval expenditures to a reasonable minimum. All expenditures by the Navy for labor, material, and supervision, including expenditures charged to "Pay of the Navy," are a draft upon the resources of the country; they are of the nature of a capital expenditure. The country indirectly receives great returns from the protection which the Navy affords against disturbance of its economic operations, from the Navy's stabilizing influence on international political relations, from the development of ideals and of skill in the naval personnel, and from the protection the Navy affords to citizens abroad and to commerce on the seas. But the more sparingly capital resources are expended in accomplishing the object for which the Navy exists, the better off the country will be. The bureau, in so far as the work assigned to it is concerned, considers this a principle of the first importance. It is important in peace time, owing to the necessity of meeting the general desire of Congress and the people of the United States that expenditures for naval purposes be restricted to a minimum. It is important in war time, as the great cost of modern warfare may form so serious a draft upon national capital and resources as to be a cause contributory to defeat or stalemate; or if victory be nevertheless attained, the great expenditures will be followed by heavy burdens for generations. In either case the duty of effecting all practicable economies is self-evident.

9-04. Lowest reasonable cost contributes to efficiency and expedition. In planning definite projects or operations, a study of the cost of the operation is of primary importance. A proper balance must be obtained in any given project as between its cost and its urgency from the standpoint of time; to reach the lowest standards of cost might in urgent cases mean the expenditure of so much time in preliminary study as to defeat the object of the project, particularly if it be preparatory for some other important operation. Very specific attention at this point is directed to the fact that low cost of work means a less expenditure of labor and of material, and therefore, probably, of time as well. In general, the lowest reasonable cost of work consistent with accomplishment of the desired object should contribute greatly to efficiency and expedition in all operations under the bureau's cognizance.

9-05. Highly trained personnel needed to attain low costs efficiently. Low cost of work can not, however, be attained except with the aid of a high grade and highly trained and indoctrinated

personnel, since the minds of many, particularly those who are untrained, can not appreciate the importance of low cost of work and its bearing on efficiency and expedition, nor are they able to carry the superimposed burden of economical planning, over the mere planning to accomplish the objective. This is in part the explanation of the slogan, often repeated, that in time of war "money is no object," and the statement that "economies have no place in military operations." These expressions do not represent the whole truth, and embody a fallacious principle which is, unfortunately, only too prevalent.

9-06. Unnecessary costs represent misapplied effort, and retard operations. From one point of view alone is it necessary to demonstrate the importance of considering costs. Unnecessary cost of work is identical in meaning with unnecessary expenditure of labor and material or, in the last analysis, of human effort, and it is a menace in any serious undertaking of a military bearing, or in an exigency of war. The reason for this is that every unit of labor and every unit of material which is not expended in the most efficient way in the direction of preparing for war, winning a war, or winning any given operation in war, not only contributes nothing to the result contemplated but actually retards the operations by withdrawing resources which might have been applied directly to the desired end.

9-07. Analysis of projects is necessary. Any given project, large or small, should be analyzed in advance from the standpoint of its necessity and as to the elements of its cost. It may be considered from several standpoints:

First. Will the completed project contribute to the efficiency of the naval service?

Second. Can the project be modified or curtailed so as to reduce its cost without in any way impairing its usefulness?

Third. Determine in detail the various features of the designs, so that each part may perform its function with the minimum expenditure.

Fourth. Select the proper materials with reference to their strength and suitability, and market conditions.

Fifth. Having decided upon the extent of the project, consider how it may be carried out at the least cost, whether by contract, by day labor, by specially selected enlisted forces, or by a combination of these; without, however, suffering loss in efficiency or time in execution.