department appeared to be unlawful. The Congress was therefore requested to authorize the making of partial payments under the contracts of this department up to the value of the work already done, and a provision relating to the matter was inserted in the naval appropriation act approved March 4, 1911, but the payments authorized were restricted to 90 per cent of the value of the work already done. This limitation made it impossible for the department to carry out its agreement in contracts then existing that payments would be made without reservation of any percentage therefrom. Moreover, payments had already been made in excess of 90 per cent under many contracts, and the department was obliged to refuse further payments until work should be done equal in value to one hundred ninetieths of the payments already made. This provision of law was repealed by joint resolution of August 14, 1911 (37 Stat., 37), and on August 22, 1911, an act (37 Stat., 32) was passed authorizing, as originally requested by the department, partial payments under all contracts up to the full value of the work already done. This permitted a return to the original practice, but most of the contractors from whom there had been withheld, between March 4, 1911, and August 14, 1911, 10 per cent of the payments earned under contracts promising partial payments up to the full value of the work done, have filed claims for reimbursement of extra expense incurred on account of having to finance their work on reduced payments. These claims, if not paid by the department, will probably be carried to the Court of Claims or to the Congress. The Comptroller of the Treasury will, however, be requested to decide whether such claims can be paid by the department in accordance with the provision in the contracts for paying increased compensation for changes authorized therein. CLAIMS UNDER OLD CONTRACTS. In numerous cases before the Court of Claims involving demands against the Government for reimbursement on account of changes made in vessels built under contract during the Civil War, the Government was at a great disadvantage because the report made by a board of which Commodore John B. Marchand was senior member, appointed in 1867 to consider the claims of the contractors, could not be found. The claimants alleged generally that said board had conducted its proceedings behind closed doors and had not considered the facts and circumstances on which the claims of the contractors were based. Considerable sums were found due by the court in many cases and paid by the Government because, owing to the lapse of time and incompleteness of the records, it was not possible to refute unjust claims advanced. In the summer of 1909 Mr. S. S. Ashbaugh, of the Department of Justice, who was placed in charge of the defense of this class of cases, found that the Marchand Board's report was in the possession of that officer's widow, then living at Annapolis. The report and the papers accompanying it were recovered and placed on file in the department and have been found to contain information of great value that will probably enable the Department of Justice to defeat the unpaid claims referred to in whole or in part. The question as to the force to be given this report and its effect on the claims to which it relates is about ready for consideration by the court, and will, it is expected, be decided at an early date. If the contention of the Department of Justice is upheld, this department will be relieved of considerable labor that otherwise would be necessary in furnishing information concerning those old contracts. FREIGHT AND PASSENGER RATES ON SHIPMENTS OF PUBLIC STORES AND TRANSPORTATION OF MEN. In a number of cases where it was thought that railroad and steamboat companies had been charging the department higher passenger and freight rates than they were entitled under the law to receive for the transportation of men and shipments of stores, supplies, and other Government property, the Interstate Commerce Commission has been petitioned to investigate and determine the questions. These cases have required, besides clerical work in the department, the attendance before the commission in some instances of a representative from this office, and it is gratifying to be able to say that the readjustment and reduction of rates asked for have been obtained in every case and reimbursement made where excessive rates had theretofore been paid. There are several rate questions of importance that are now under consideration by the department and the railroad companies, and it is hoped that these may be adjusted in accordance with the principles heretofore established without resort to the Interstate Commerce Commission. REIMBURSEMENT FOR USE OF PATENTS. The act of June 25, 1910 (36 Stat., 851), authorizing the owners of patents that are used by the Government without permission or legal authority to bring suit in the Court of Claims for damages, simplifies somewhat the question as to the payment of claims for royalties, and it is believed that the work to be done in this office in connection with such matters hereafter will be less than it has been in the past. Procedure before the court in accordance with the law. will, no doubt, insure a fairer settlement of claims than the department, without the necessary facilities for examining and considering all the facts involved, could effect. The only detriment to the public interests that is believed likely to result from the administration of said law is the making public of the department's secret information or processes when necessary in defending against claims under patents covering inventions that are alleged to be infringed. COLLISION CLAIMS. The provision in the act of June 24, 1910 (36 Stat., 607), authorizing the department to consider and adjust claims not in excess of $500 for damage done to private ships and other property by naval vessels has afforded much relief to the department and to claimants also, as was expected by the department when asking for legislation on the subject. The act requires a report to Congress in every case and a specific appropriation before reimbursement can be made, but as the estimates for payment of such claims are included in the annual appropriation bills delays of the kind formerly experienced in 20986°-NAVY 1911-11 settling collision claims for small amounts have been materially reduced. It appears improbable that legislation can be obtained that would enable the department to settle in the same way claims exceeding $500, and it is to be regretted that claimants, both citizens of this country and foreigners, are subjected to delay that is unbusinesslike as well as unjust after their claims have been approved by the department. SURETY ON BONDS. For a number of years it was the universal custom for shipbuilders to furnish as security for the fulfillment of their contracts bonds with bonding companies as surety. The cost of such bonds to the contractors was of course included in the prices named in the proposals, and was in that way paid by the Government. Lately, however, the builders have found it difficult to obtain surety from corporations at satisfactory rates, and several of the companies have returned to the practice of giving bonds with individual sureties. As a result it is believed that owing to the close competition among the various companies that construct naval vessels the Government will obtain somewhat lower prices on ships without impairment of the security furnished for the performance of the work. THE EIGHT-HOUR WORKDAY. It was feared that the application by the act of June 24, 1910, of the provisions of the eight-hour law of August, 1892, to the construction of naval vessels might deter bidders and prevent the placing of contracts for such vessels, but an acceptable proposal for building battleship No. 35, provided for by the act of 1910, was received in answer to the department's advertisement. Likewise the two colliers, No. 9 and No. 10, authorized by the same act, for which no satisfactory proposals were received when advertised for in 1910, have since been contracted for after advertisement upon practically the same plans and specifications. The act of March 4, 1911, goes somewhat further in the application of the eight-hour day for persons employed in the construction of naval vessels, forbidding payment to contractors unless they establish and maintain the eight-hour day for their employees, and leaving questions of compliance with the law to the determination, ultimately, of the Comptroller of the Treasury. That officer, in answer to a request from this department, rendered a decision defining the scope of the law so that all builders are definitely informed as to what will be required of them in regard to the matter. What the effect will be on the bidding for the battleships provided for by the act is problematical. The submarine boats authorized by the act of 1911 and covered by the provisions thereof relating to the eight-hour day were submitted to competition, and acceptable proposals for their construction were received from the Electric Boat Co. and the Lake Torpedo Boat Co. It is not possible to say whether other builders or designers of submarine boats were prevented by the eight-hour-day provision from submitting proposals or to determine the extent to which the cost of these latest boats is to exceed previous prices as a result of said provision. IMPROVEMENT OF ELIZABETH RIVER. The last naval act made an appropriation for widening and deepening the channel of the Southern Branch of the Elizabeth River, opposite dry-dock No. 3, navy yard, Norfolk, Va. The Secretary of War has established new harbor lines at the request of this department, and the improvements in view will provide a 30-foot channel about 850 feet wide, affording the largest naval vessels safe and easy access to the new dry dock in addition to benefiting the commerce of Norfolk Harbor. The only property that must be purchased for effecting the improvements is an old sawdust and shell fill, part of which must be dredged away. This fill adjoins one of the tracts of land bordering on the river at this place, and as the owner thereof demands a price that seems to the department exorbitant the Attorney General will be requested to institute proceedings to acquire title to it by condemnation. UNSETTLED MATTERS DISCUSSED IN LAST YEAR'S REPORT. BRANCH RAILROAD TO NAVY YARD. Since the last annual report was made it has not been possible to have the construction of the branch railroad track to the navy yard in this city begun by the Philadelphia, Baltimore & Washington Railroad Co., as authorized by the act of June 24, 1910, because the question of title to the land to be occupied for the purpose is in litigation. It is believed, however, that the question of title will be settled before long and work on the branch track undertaken as contemplated. OBSERVATORY CIRCLE LANDS. The purchase of the small tract of private land lying within the Observatory Circle by exchange therefor of Government lands outside but in the vicinity of the circle, has not been effected, because no satisfactory arrangements concerning relative prices of the parcels of land involved has been reached. An arrangement has been made, however, with the Massachusetts Avenue syndicate, which is grading and filling large areas of land near the circle, to grade the Government's lands in that neighborhood without cost to the department, and it is believed that after this improvement is made the land can be disposed of on more advantageous terms. ADDITIONAL LAND FOR NAVAL HOSPITAL, NEWPORT, R. I. The negotiations that have been in progress for some time for the purchase of additional land adjacent to the naval hospital, Newport, R. I., are not yet concluded. The owner of the desired tract wants a price for it that the department considers too high, and consequently it will have to be acquired by condemnation, if it is taken at all. The SECRETARY OF THE NAVY. PICKENS NEAGLE, |