The $10,000 Gallon of Oil: An Adventure in Graft

[AUTHOR’S NOTE: I have a friend who is a contractor in New York, but he is not like any contractor you ever met. His business is probably the strangest in the world. His organization consists only of himself and his secretary; he has no equipment other than his nimble brain; but for some years now he has been making a comfortable living at what he calls ‘outwitting the grafter at his own game.’ A product of the sidewalks of New York, he worked his way through the College of the City of New York by clerking nights in the Railway Mail Service. During the war he had his first taste of handling construction materials and supplies in the Transport Service, and, on being mustered out, he went headlong into New York’s business whirl — supplying tons of this and carloads of that to city, state, and federal agencies. With a fanatical hatred of civic corruption, a sixth sense for the wiles of largescale graft, and a frantic curiosity about what it actually costs to make and deliver supplies to the government (as contrasted with what the government pays for them), he was peculiarly equipped to wrest fat contracts from firms which had long enjoyed a monopoly of them. His primary object, like that of every man in business, was to make money for himself, but it has been a source of much satisfaction to him that his ingenuity has also saved the government hundreds of thousands of dollars. I have listened to him many evenings, talking about his exciting adventures, painting a picture of graft from a point of view that was wholly new to me. The following is one of his stories as he told it to me.]

I

I ’M in the contracting business. Chiefly on government, state, and municipal bids.

I am not a specialist. I frequently bid on anything that comes along — anything on which the government, a state, or a city offers specifications. It may be oil. It may be sand. It may be anything in the world from shoelaces to sheep manure.

I usually start from scratch, which means that I find out exactly what’s wanted, then determine what the wanted article is made of. Then I go about rounding up sources of supply, and estimate my costs of delivering so I can submit a bid.

Now the contracting business, as everyone knows, has to contend with every form of graft. It happens that I am not a reformer by instinct. And I ’m not a graft-fighter by profession, either. But I frequently resort to the tactics of either the one or the other.

As a matter of fact, I ’ ve found there’s good pay in the reform game, and a thrill around every corner in baiting graft. To be perfectly honest about it, these are my chief reasons for playing the game. I make what you would consider a decent living out of it.

I have never been under the delusion — even for a minute — that I could reform the grafters, or that I could drive them out of business. I’ll leave that to others. And I wish them luck.

II

Now about this $10,000 gallon of oil. . . .

It was in 1929. One of the largest government arsenals had advertised that it; wanted to purchase thirty-five thousand gallons of oil.

The arsenal in question happens to be a storage place for millions of dollars’ worth of guns, cannon, and other pieces of artillery. Naturally, as long as the United States remains at peace with foreign nations, so long must these munition pieces be kept absolutely rust-free.

So this oil was to be used as a rust preventive. If you know anything at all about rust-preventive compounds, you know you can make them any of a dozen ways. That was the big loophole in the proposition — and I put my neck right into it.

They did n’t specify the definite composition of the oil. But they did state the purpose for which they wanted it, and the tests they were going to apply to it. Between the lax specifications and the rigid tests for the oil, anything might happen. I knew that from the start.

The tests the arsenal proposed were these. First, a highly polished piece of steel was to be coated with the oil and then subjected to a spray of saltwater solution for five consecutive days. That happens to be an honest and severe test for any rust preventive. If you ever have the urge to go in the rust business, apply salt water to steel and you’ll be well on your way.

Another test they proposed was to place one of these oil-coated pieces of steel on the roof of a building for something like thirty days. The elements would then do their worst.

They even had a third test, — an ultra-violet-ray test, — but I won’t bother you with the details of it. You can gather easily enough that while the government might have been lax on specifications for the ingredients, it was certainly protecting itself on performance.

But it was more than mere protection. My story will show you why.

With the latitude on the ingredients so wide, — and with price determining whether or not I should get the contract, —I had almost nothing to go by in deciding what figure to submit. So I started, as I always do, from scratch.

Scratch in this case was the Standard Oil Company of New Jersey, which maintains a large and competent laboratory for just such problems. They had a ‘slushing oil,’ they told me. They felt certain it would pass the ordinary rust-resisting tests, but they were not so sure it would stand up under the salt-spray test.

You don’t have to be an astute business man to see that if I accepted the obligations of a contract of this kind, and if the material later failed to pass the tests, I should have on my hands seven thousand five-gallon cans of oil with little commercial value — or the practical equivalent of a very pretty kettle of fish.

So I was obviously gambling when I accepted the Standard Oil offer of thirty-three cents a gallon, with no guarantee on the salt-spray test. But, as I should have said before, gambling is part of graft, whether you ’re in it or fighting it. I was pretty certain that the strangely indefinite specifications and the decidedly severe tests could mean just one thing: Whoever took that contract would take it at a stifT price.

I made my price stiff. I submitted sixty-three cents a gallon, and with it, of course, a bond guaranteeing that I would fulfill the contract. If you care to do a little figuring, you will see that this amounted to slightly less than 50 per cent profit. On 35,000 gallons, a rather tidy sum.

III

I was low bidder. The contract was mine. Then things began to happen.

I called the arsenal long distance. I wanted two further points of information.

Were there any other bidders?

There was one other bidder. I ’ll call him the XYZ Oil Company of Chicago.

And what did he quote?

His price was ninety-three cents a gallon. Mine, to repeat, was sixty-three. This meant a difference of more than ten thousand dollars over my bid. And I was going to make a fat profit, too!

I asked the arsenal to allow me to send them a five-gallon sample of my rust preventive for their tests. But the major to whom I spoke was more accustomed to giving orders than to accommodating contractors. I would please send at least a carload of the oil, which, as he carefully reminded me, I had obligated myself to furnish the government and which would have to pass all the tests.

Standard Oil of New Jersey made up the carload shipment of oil at their Bayway plant. And while the oil rolled over the rails I crossed my fingers, and kept them crossed.

Ten days later I opened a telegram which read like this: —

FIRST CARLOAD RUST PREVENTIVE COMPOUND REJECTED FOR FAILURE TO PASS SALT WATER SPRAY TEST STOP MATERIAL URGENTLY NEEDED STOP UNLESS ANOTHER CARLOAD MEETING SPECIFICATIONS SHIPPED AT ONCE WILL CANCEL CONTRACT AND PURCHASE MATERIAL IN OPEN MARKET CHARGING THE DIFFERENCE IN PRICE AGAINST YOUR BOND.

The government meant business.

So did I.

After I’d talked things over hastily with the Standard Oil chemists, I decided there was just one thing to do. I took the next train out, to lock horns with the government and a decidedly irritated major.

Next afternoon the major and I drew our battle lines.

I said that I’d worked out the oil ingredients with chemists of one of the biggest oil companies in the world, and certainly the best-known one. If they could n’t produce an oil to meet the tests, who could? I was n’t exactly being tactful, and I did n’t hesitate at hinting that perhaps the tests were impossible to fulfill.

The major was n’t even vaguely ruffled. He politely introduced me to his chief chemist who handled the details of the rust preventive. This chemist had conducted an intensive study of rust prevention — a matter of many months. It did n’t take him long to convince me that he was as expert on the subject as I was ignorant.

Ignorant on rust prevention — but not exactly ignorant about this contracting business.

When he told me that there was, in his opinion, only one company in the whole United States capable of producing an oil which would meet those tests, then I was curious. Who wouldn’t be?

He did n’t mind telling me that it was the XYZ Oil Company of Chicago.

He said there was one thing, and only one thing, for me to do. I should default on the contract. The arsenal would then purchase the compound from the next highest bidder. And the loss — or the difference of over $10,000 between our prices, as well as the loss of the carload already shipped and rejected — would be laid squarely in my lap.

This began to look serious. So I went back to my hotel room to worry. But I also managed to do a little thinking.

I figured this way: —

If I could possibly secure a sample of the XYZ product, Standard would be wizard enough to duplicate it. And since it was a formula which, as I guessed, a United States Army chemist had presumably worked out . . . well, if an unknown oil company knew how to produce it, another could learn.

With just the smallest kind of sample, a mere cupful, the whole problem of saving millions of dollars’ worth of army equipment, not to speak of my own problem of saving myself a good many thousand dollars and no end of grief, and all my chances of ever doing any business whatever with the government again — why, they’d all be solved. Maybe just a spoonful of that oil would do it.

IV

So I went to Chicago.

It was a one-man hunt for XYZ’s pet brand of rust-stopping oil. You won’t be especially interested to know that I put up at the Lake Shore Hotel, but I have never been able to forget the fact.

I started for the offices of XYZ. I was amazed (as who would n’t be?) to discover they were situated in a strictly residential district on the northwest side of the city. And the offices themselves consisted of nothing in the world but the front parlor of an old railroad flat, plus a desk of ancient vintage and a telephone.

This was the setting in which I found Mr. Moore, the president, vice president, secretary, and treasurer of the XYZ Oil Company. The head offices, mind you, and the only offices of a concern furnishing the United States Army with thousands of gallons of oil at almost a dollar a gallon.

I introduced myself as a representative of the Ace Machinery Company of York, Pennsylvania. I told Mr. Moore that I ’d learned he was making a very fine rust-preventive compound which possibly we could use in our plant. I went on to explain that much of our machinery had to be idle in the winter, and that we wanted to coat it with a rust preventive that would give us every possible protection.

About how much was I figuring on? Oh, say about five hundred gallons. How much would his price be? One dollar and a half a gallon. Was it really the very best that could be had for the purpose, as I had heard? Certainly! Why, at the very moment, he said, one of the departments of the government was negotiating with him for a large quantity. They had already put it to all kinds of rigid tests, and it had passed all of them successfully.

I said his price was not unreasonable (though it most certainly was), and if he would let me have a gallon sample I would take it to our York factory, have a test made, and send him my order for five hundred gallons.

At a dollar and a half, Mr. Moore was giving away nothing. And, chuckling at the prospect of a good initial order, he gave me my sample gallon.

I could chuckle, too.

I snuggled the sample under my arm and taxied back to my hotel. I figured that sample was worth about ten thousand dollars to me.

I was in my room throwing things into my grip to catch the train when the telephone rang.

‘This is Mr. Moore of the XYZ Oil Company, and I’m downstairs in the lobby.’

He was, was he?

Mr. Moore went on to explain. Just after I’d left his office, it seems, he’d discovered that he’d given me the wrong sample. He wanted it back. Of course, he’d parcel-post the correct sample to my factory in York.

He would, would he?

‘Mr. Moore,’ I said, ‘won’t you wait just a minute in the lobby, and I’ll be right down.’

I’d be down, all right.

It came to me in a flash that perhaps someone at the arsenal had telephoned Mr. Moore about me. You might call it a warning. I’d call it a tip-off.

So I slipped the sample gallon of mystery oil into my grip. I did not take the elevator. I ran down the seven flights. And I picked a back stairway for my run.

I was in a cab. I had not paused for the conventional courtesies of paying my hotel bill. That would have to wait.

The Twentieth Century was not due to leave for half an hour. But I boarded it, and went at once to the men’s room. And I locked myself in.

If you like to collect wise-cracks, I’ll tell you what I told the porter to get myself into that room. I told him it was an emergency. It was, was n’t it?

I stayed locked in until the train was on its way.

V

A day later, Standard of New Jersey had analyzed my sample. It was precisely the same oil as the slushing oil which I had shipped to the arsenal, but there had been added to it (and all credit to the genius who thought of it) seven per cent of rosin oil. The rosin oil, as you may guess, was the cheapest part of the whole compound. But it did the trick when the oil was put to the salt-spray test.

It did the trick for me, too. I fulfilled the contract.

And because all good adventures in graft have to have a moral ending, I’ll take pains to remind you that this story has one, too. I had saved the government, and the taxpayers, and myself, the rather nice sum of $10,000.

(In a subsequent issue, ‘The $4000 Snow Shovel’)