• WAR DEPARTMENT P o Box 2610 WASHINGTON 0 C ·- EIDM WL-27 REFER TO FILE No _ __ CONFIDENTIAL1 November 1944 Subject Report of Inspection of Concessions at Hanford Engineer Works To Major General L R Groves C E From Colonel E E Kirkpatrick I - Authority 1 Pursuant to your verbal orders an inspection of the concessions at Hanford Engineer Works bas been made ' II - Matters Investigated 2 The concessions were inspected with regard to contracts service rendered administration operation pric s charged and fair profits The inspection consisted of a tour of the various concessions review of financial statements and interrogation of individuals concerned III - Facts Discussion J The concessions at Hanford are uniformly let on a monthly rental basis for facilities occupied Final contracts for the facilities have not yet been completed but are in process of being negotiated At the start of the project difficulty was experienced in getting concessionaires on the job and in-opositions had to be made attractive due to the unknown risks involved Since that time most of the businesses have been quite lucrative The Project Manager and the Office of the Area Engineer were cautioned that profits derived in the operation should be considered when the final contract terms were negotiated In many cases it will be difficult to determine the exact figure but reasonably accurate estimates of earnings should be possible Prices charged at Hanford were comparable to those at Richland and other surrounding towns and services afforded the population were adequate There were no concrete evidences of grossly excessive profits but some may be uncovered by the contractor's inquiry In one case it was stated that the original grocery concessionaire who had been a small operator had cleared in excess of $80 000 before taxes in his operation This can be compared to a store owner in a nearby town where income had been less than $5 000 per year prior to the start of the project and during the past year he has netted about $32 000 before taxes I I 9 L YY 0 DECLASSIFIED IAuthority NNb • coNFIDENTIAL 1 November 1944- Concessions Hanford Engineer Works 4 Concessions at Richland Facilities Tab 11A11 is a photostatic copy of a listing of all existing and contempl ated concessions at Richland giving the present status of each pertinent contract provisions etc § · b Prices It will be noted that in all but four cases the government Is share in the gross receipts is on a percentage basis In t hese exceptions the percentage of profit is limited except in the case of the temporary food store The profits of the temporary food store are being carefully watched and in case of excesses adjustments will be negotiated The bank pays no rent and init u there f provides free service to the goverrunent and the contractor t a 't _ The variety of stores will create a competitive situation with r egard to Richland establishments Prices have already reached a level comparable to the surrounding towns Frequent price studies h ave been made and h ave resulted in a healthy adjustment during the past four months Tab 11 B11 is a recapitulation of a survey made in May s ince which time conditions have improved as indica ted in Tab 11 C11 which refl ects the price situation as of 26 September Prices at Richland Thrifty Drug are a little high but a ction is being taken to correct this situation The Safeway prices represent about t he minimum that can be charged in the area Inclosed is an advertisement from the Walla Wall a Union Bulletin of 26 October which indicates that the same prices preva il at Safeway Stores in Richland Walla Walla Freewate Dayton Pasco and Kennewick The survey reveals that prices in other stor 3S a t Richland compare favorably with those at Safeway when the type store is taken into consideration It can be said that t he prices char ged in stores a t Richl and h ave been in line with OPA ceil ing regulations and in the main have been competitive with t hose charged in the general territory Paragr aph 17 of the standard concession contract for Richland provides additiona l protection by specifying that prices charged will be fair and reasonabl e and consistent with the volume of business OPA regulations and normal profits in like businesses 5 Food and Drug Stores at Hanford and Richland The price policy for food and drug stores has been discussed abov e The stores themselves are adequate well stocked and the service given i s satisfactory Conditi ons will improve as more facilities become availabl e 6 Hotel and Cafeter ias a t Richland The concession that has caused the most discussion at Richland i s the Hotel and Feeding accommodations These concessions are operated by the Progressive Cafeteria Company in facilities costing the government $281 500 and equipped by the government to the extent of $59 000 CONFIDENTIAL - 2 - ___ _D_E_C-LASSIFIED Authority N t 9 L'140 • CONFIDENTIAL Concessions Hanford Engineer Works 1 November 1944 The government receives 25% of the gross receipts from the hotel $800 per month for the cafeterias $100 for the coffee shop and $25 for the news stand For the year 1944 the government will gross approximately $40 000 from this property or 11 8% per annum for furnishing the properties including utilities etc 7 Financial figures for the entire operations are as follows _ Profit January l to August 30 1944 Profit September 1944 $ 36 321 20 3 458 92 Income January 1 to September 30 1944 Profit Rooms $ 85 386 5 3 15 88% 16 002 99 Cafeteria 350 513 69 65 2w 30 719 -53 Coffee Shop 87 096 75 16 2 Jfo LOSS - 8 422 92 News Stand l4 628 56 2 7ZI $537 625 49 Total Sales September 1944 d Cost of Sales Cafeteria Coffee Shop News Stand Total 37 622 05 12 £t72 £i 8 $ 209 385 79 Gross Profit Due Total Oper Profit 328 239 70 80 20 $ 328 320 6 3 18 7 $ 8 76% 9 67% 71 840 53 · $ 159 2SS 26 0Eerating Exoenses Cafeteria $ 145 664 • 39 Coffee Shop 54 210 49 News Stand 75 3 45 Rooms 65 767 28 Total Oper Expense $ 266 395 61 Adm Gen Expense $ 22 144 90 Net Profit 39 76o 12 $ 7 1$ for 9 months 8 e It is believed that the above profits will become smaller when the c nstruction program i s completed and the operating forces ar est ablished thus affecting a more stable population and reducing t he number of t ransients The rates charged in the transient quarters are comparable to those at good commercial city hotels Accommodations are as good or better but there is less service During September there were available 3390 roomdays 2560 were occupied at an average rate of $3 69 per room and $2 68 per person The hot el was 75 52% occupi ed during t he month CONFIDENTIAL I - 3 - DECLASSIFIED I Authority NN 9 LYL 0 4t CONFIDENTIAL Concessions Han£ord Engineer Works 1 November 1944 a • For the past nine months the average monthly profit for the hotel has been approximately $1 780 per month At the same time there has been a loss of $8 422 92 in the coffee ship or approximately $940 giving a net monthly profit of approximately $850 00 With 2560 occupancies a month the net prof t per room per da is only 33¢ This is too narrow a margin ' to permit adJustment until sucn time as the plant arrives at a more stable operating status g The service end food at the cafeteria can only be classed as fair Prices are af3 high as those fcnm d in regular city cafeterias o f the better type The concessionaire could well afford to improve both the quality of food and service and make a reduction in some of the prices • h· The Coffee Shop has satisfactory service but the quality of food and service is not as good as what can be gotten for the same price at t e average hotel or restaurant except those in large cities As this facility has operated at a loss of-nearly 1 it must be subsidized by the hotel profits The cost of labor makes it impractical to reduce the cost of meals in this facility and it is believed that the present operating loss will have to continue and be considered as a part of the hotel service paid for in room rental It would not be advisable to shut down the Coffee Shop as it fulfills a definite essential need at the project 1· Sanitary conditions are satisfactory IV - Recommendations 8 It is recommended that a Each concession contract be reviewed and the amount of profit be determ ed with a view to revision of contracts if legal and fair and to insuring that the concessionaire will not move from the site until t he close of the work There is bound to be a period of diminishing return which might result in current losses as the project closes out l • E KI s7 ¥t __ Co r I of Engineers I Tab •A• - List of conce si at Ric'J J d B _ Recapitulation of Food store survey May 1944 C - Safeway Adv ertisement D - October price summary E _ Progressive Cafeteria Transient Quarters News Stand and Coffee Shop Contract• In closures continued on next iage • _ _ 4 iI CQNf DECLASSIFIED Authority N® 9 2 '- l O I e CONFIDENTIAL • Concessions Hanford Engineer Works 1 November 1944 • Inolosures continued Tab F11 - Progressive Cafeteria Contract G - Copy of Audit of Progressive Operations by Horwath Horwath for 4-month period ending April 30 1944• H •- Operating Statement as of September 30 1944 I - Prices charged at Richland cafeterias J - Copy of standard Lease form for concessions K - Profit Loss Statements for miscellaneous concessions at Richland CONFIDENTIAL - 5 - DECLASSIFIED Authority NNb 9 L YL 0 L