811.24596/12–2746
The Secretary of War (Patterson) to the Secretary of State
Dear Mr. Secretary: As a result of the President’s approval of the Acting Secretary of State’s memorandum23 contained in SWNCC 340/1 recommending withdrawal of United States military forces from the Philippines, all permanent construction on Philippine bases has been suspended.
Contracts totaling approximately $42,000,000 covered by Fiscal Year 1946 appropriations are now in force. The present suspension of construction is resulting in a loss to the United States Government [Page 941] exceeding $15,000 per day, the cost of maintaining the engineering and construction force mobilized for this work, without any tangible benefit accruing in the form of construction accomplished.
Termination of the contracts at this time would result in loss to the United States Government of nearly five million dollars, representing non-recoverable overhead and contractors’ costs, and the unexpended balance of the Fiscal Year 1946 funds would revert to the Treasury, constituting a serious loss to the War Department, In this connection, I feel that an additional appropriation of funds at a later date, to replace these funds which would revert to the Treasury, would be difficult to obtain in the face of prospective forced economies within the Government.
Under these circumstances, the non-productive cost accumulating daily under the present suspension must be balanced in our consideration against the high costs of termination of present contracts and later entering into new contracts should a decision be made to retain a permanent token force in the Philippines.
Because of the belief of Ambassador McNutt and representatives of your department that the Philippine Government will make a strong request for the continuance of an Army token force in the Philippines under the revised draft base agreement, I am reluctant to terminate the contracts. However, faced with this mounting cost of suspension I feel that unless the request is forthcoming and approved by the President within the next 30 days, consideration must be given to termination of the contracts. I point this out to indicate our difficult position in this regard, and the urgency of arriving at a final decision.
Sincerely yours,