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FEDERAL RESERVE

Correspondence
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Chairman Eccles
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Subject .'.Attached memorandum on construction
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thfink you will be interested in reading the attached
memorandum, which was given to me by one of the men at FHIU If it
accurately reflects a general situation, then it would indicate
that the increasing volume of private building is making contractors
indifferent to opportunities to bid on government contracts and
making the cost of governmental red-tape pretty high in relation
to private building costs*




RE: Cost Checking on PWA Projects
A Mr. Smith, assistant to Mr* Charles Meyett, Chief of Construction Costs, PWA, interviewed me yesterday regarding costs of
various commodities entering into their projects*
It appears that over a period of about a year cubic foot
prices, including builder's profit on competitive bidding, indicated an
advance from forty-one cents a cubic foot to the most recent letting the
Jane Adams Project in Chicago to fifty-eight cents per cubic foot. These
prices are based on the PWA layouts and specifications and are two and
three story, fireproof, walk-up type.
Mr. Smith had a chart with breakdowns by trades, rooms and apartments. Some of these charges seemed entirely out of line. In the brick
masonry item their cost of $52.00 per M laid as against our cost in
New York area of $35.00 to $35.00 per M laid.
They seem to be entirely concerned regarding the great advance
in the pipe trades which over this period of time advanced well over 5O$6
on an average.
About a year ago they found that a heating system consisting
of two pipe steam iracuum, exposed radiation, central plant, oil burners
and mechanical stokers ftom the Steamfitterfs Contract cost $1.50 per
square foot of radiation* Our comparative then was $1.50 per square foot.
Since that time, and on the letting of some six or seven projects, these prices have advanced in stages of 15$ to ZOff> over the previous
figures until the last letting llThe Jane Adams Project" shows a cost on
the above heating system of $2.80 per square foot of radiation. Our
maximum in New lork market is $1.80 per square foot of radiation.
The same condition reflects on the plumbing contract which reflects an addition of $15.00 to $20.00 per fixture, or about $90.00 per
fixture set. Our present day cost per fixture in the New York area
averages |70.00 per fixture set.
The electrical work reflects a $15.00 to $16.00 charge per
conduit outlet against our present New York value of $7.00 to $7.50 per
outlet.
In discussing this subject I gave Mr. Smith some unit prices
on heating and plumbing cubic contents and cubic foot costs of several
recently estimated projects, and have received a telephone call from him
stating that he has plotted this information on a chart and finds our




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figures are very consistent and reflect a high degree of accuracy in
the takeoff. I have asked him for a copy of this chart , also a copy
of his breakdown on their projects which he will give me on his next
visit, which will be in a day or two*
My reaction to the condition at which FWA is genuinely
alarmed is as follows:
1* Too rigid a specification*
Z. Too severe and arbitrary attitude to inspection and
the lack of consideration of the type of structure under contract*
3* The large amount of red tape and requirements that
the contractor must put up with, and naturally will add to the bid cost
to cover these items*
These items I feel sure are the main cause of the following
conditions which Mr* Smith discussed:
On the first project they had any number of contractors
anxious to bid* A year ago they had an average of ten bidders* During
the year it has been reduced to only four contractors, each of whom was
personally invited and interviewed, all saying they did not want any more
PWA jobs, but each was prevailed upon to submit a figure. This may be
the cause of the last job being let at fifty-eight cents per cubic foot*
A recent job of FIA located in the South was advertised for
bids over a six-weeks period and on the opening day no bid was received*




Cost Engineer