He details in full the course pursued by him to protect the rights of the Government in respect of certain vessels unfinished at the time of his accession to office, and also concerning the dispatch boat Dolphin, claimed to be completed and awaiting the acceptance of the Department.  No one can fail to see from recitals contained in this report that only the application of business principles has been insisted upon in the treatment of these subjects, and that whatever controversy has arisen was caused by the exaction on the part of the Department of contract obligations as they were legally construed.  In the case of the Dolphin, with entire justice to the contractor, an agreement has been entered into providing for the ascertainment by a judicial inquiry of the complete or partial compliance with the contract in her construction, and further providing for the assessment of any damages to which the Government may be entitled on account of a partial failure to perform such contract, or the payment of the sum still remaining unpaid upon her price in case a full performance is adjudged.

The contractor, by reason of his failure in business, being unable to complete the other three vessels, they were taken possession of by the Government in their unfinished state under a clause in the contract permitting such a course, and are now in process of completion in the yard of the contractor, but under the supervision of the Navy Department.

Congress at its last session authorized the construction of two additional new cruisers and two gunboats, at a cost not exceeding in the aggregate $2,995,000.  The appropriation for this purpose having become available on the 1st day of July last, steps were at once taken for the procurement of such plans for the construction of these vessels as would be likely to insure their usefulness when completed.  These are of the utmost importance, considering the constant advance in the art of building vessels of this character, and the time is not lost which is spent in their careful consideration and selection.

All must admit the importance of an effective navy to a nation like ours, having such an extended seacoast to protect; and yet we have not a single vessel of war that could keep the seas against a first-class vessel of any important power.  Such a condition ought not longer to continue.  The nation that can not resist aggression is constantly exposed to it.  Its foreign policy is of necessity weak and its negotiations are conducted with disadvantage because it is not in condition to enforce the terms dictated by its sense of right and justice.