Southern Pacific Railroad History Center


Contract Department

The contract department was a sub-department of the operating deparment.  The contract department’s mission was to successfully reduce to writing the initiatives and policies of senior management while protecting the best interests of Southern Pacific. Because of internal and external influences, achieving an optimal outcome was sometimes difficult.

Written agreements are a part of the fabric of American business. They confirm understandings, provide for predictability, and allow penalties in the event there is a breach of the terms and conditions agreed to by the parties. From the time of the founding of the first railroad company in the United States, contracts have been used to memorialize agreements with others.  Agreements have been used by American railroads to cover understandings with labor organizations, acquisition and preservation of water rights; the financing of rolling stock; obtaining operating rights of way and other property; the purchase of services; the presence of trackage, pipelines, wire lines, roadways, and other types of encroachments on the properties of railroad companies; the sale and lease of lines of railroad; the sale of excess real estate; and more.

Southern Pacific entered into scores of agreements with individuals and various entities each workday. Contracts were mainly negotiated and consummated by Southern Pacific’s operating, real estate, and marketing departments, as well as others on an as needed basis.

The contract department began as a bureau of the operating department in the early twentieth century. The head of the bureau was a contract agent with a staff of one.  Initially, the bureau was responsible only for negotiation and overseeing the administration of non-joint facility agreements.  The main intent of these agreements was to protect Southern Pacific from claims of liability by individuals and entities either performing services for Southern Pacific or installing and maintaining industrial trackage, installing and maintaining pipelines, wire lines, private road crossings, and other types of installations generally on rights of way of Southern Pacific.  By the 1930s, the bureau’s charge had been expanded to include joint facilities (a joint facility is typically an operational coordination between two or more railroad companies).  At that point, the bureau became a department, with three officers.  Department leaders included Hal Smetts, who retired in 1954; his successor, Herb Fifield, who retired in 1971; and Burcy Farudo,  who retired in 1958 and was responsible for managing the day-to-day activities of the contract department during World War II, while Mr. Smetts served as a transportation planner for the United States War Department and Herb Fifield served as an officer in the United States Army Transportation Corps in India.

The head of the contract department reported to the vice president-operations. Until January 1, 1974, the contract department was responsible for all joint facility and non-joint facility agreements for Southern Pacific’s Pacific Lines. At that time, two joint facility officers were transferred from Houston to San Francisco, who had been responsible for negotiating and administering joint facility agreements for the Texas and New Orleans Railroad and the St. Louis Southwestern Railway and known as the Cotton Belt.  The former Cotton Belt joint facility officer moved from Tyler to Houston in January 1970. In addition, effective January 1, 1974, the contract department became responsible for negotiating and writing non-joint facility agreements, which were formerly the responsibility of Southern Pacific’s real estate department in Houston.

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