any discount at all, I do not believe there is any way in the world of ever knowing. I do not believe that anyone could know.

We do believe that care was exercised by our own people, and that care was exercised by the district engineer security people to prevent what might have been a serious case of lack of good faith and the possibility of paying discounts. Whether it prevented it 100 percent, I do not know, and I know of no way to find out, but I do know that a rather careful check was kept on the purchasing people of Atlas. And I know there was no hesitation to review their activities and their bank accounts, but I do believe that if there were any such cases, that they were very rare, certainly we have no way of proving that, because-and I believe the implication made by Mr. Cassidy's deposition was along that line.

Mr. DONNELLY. You do not know what Mr. Cassidy was referring to when he used the specific figure of 10 percent discount?

Mr. BONNY. I do not.

Colonel HASEMAN. NO.

Mr. McCLARY. No.

PROCUREMENT PRACTICE AND PROCEDURES IN NEW YORK OFFICE OF ATLAS

Mr. FURCOLO. The next is allegation I; the allegations, together with the Atlas Co.'s answer will be inserted in the record at this point. (The statements referred to follow:)

1. PROCUREMENT PRACTICES AND PROCEDURES IN NEW YORK OFFICE OF ATLAS

1. SPECIFICATIONS

A. QUESTION

It was alleged that vendors were permitted to determine the specifications from which Atlas would purchase its material and equipment, thus ignoring the function of the Atlas engineering department in the development of specifications. (John W. Leahy, departmental engineer, Atlas Constructors, New York (March 7-August 3, 1951)-currently with Frederick Snare Corp.-before Lyndon Johnson, subcontractor-pp. 900-902, 911-913.)

Response of Atlas

The reference is to the purchase of autos, trucks, fork lifts, concrete trucks, medical supplies, graders, tractors, compressors, shovels and draglines, spare parts and office equipment and supplies of standard manufacture, and commonly termed "off-the-shelf items." Specifications for these standard or off-the-shelf items should not be confused with items specifically manufactured to purchaser's specifications.

The engineering department of Atlas is not responsible for determining the specifications by which the manufacturer is building his product.

The engineering department, when requested to do so by the procurement director, evaluates the comparative products offered on the basis of job requirements according to vendors own product which has vendor's own specifications. For example, if we were going to buy pick-up trucks, we compare makes of comparable value such as Ford, Chevrolet, Dodge, etc. But we do not write specifications for them.

B. QUESTION

Due to changes in specifications brought about by vendors, the specifications became restrictive to the point of setting up sole source of supply. (Leahy, p. 904.)

Response of Atlas

From his testimony, Mr. Leahy is referring to fork lifts. See exhibit D-29-(a) cable CASAE 497 dated June 18, 1951, Casablanca purchase request..

Excerpt: "Ten forklifts, 5-ton capacity, pneumatic tires, 60-inch adjustable fingers for lifts up to 10 feet."

The above are the specifications or more appropriately "Minimum job requirements" as sent to Atlas, New York, for procurement by cable and later confirmed by district engineer's approved job-site requisition. Requests for quotations were sent to the following vendors: Bond Industrial Equipment Co., New York City; The Ross Carrier Co., Inc., Benton Harbor, Mich.; Hyster Co., New York City; Mellhany Equipment Co., Roanoke, Va.; Contractors Trading & Equipment Corp., New York City.

The five bids were tabulated on an abstract of bids, which were then evaluated and signed by the following: A buver, the Procurement Director, an authorized representative of the district engineer, "Approved in behalf of the United States." The purchase order was awarded on lowest price meeting most nearly job requirements and with signed approval of the district engineer.

There was only a total of 16 forklifts purchased by Atlas, New York, up to the time of Mr. Leahy's termination of August 3, 1951. There has been a total of only 61 (not 80 on one order) forklifts purchased through March 15, 1952, by Atlas, New York. The first order was issued on July 7, 1951, and the last one on December 18, 1951.

Atlas New York engineering department screened the bids on the 10 fork lifts as indicated by memo dated July 11. 1951, and submitted as an exhibit hereto. Exhibit D-29-(b), memo, John W. Leahy to R. G. Sherfey, fork lifts, July 11. 1951.

This exhibit indicates that proposals under vendor's specifications do not become restrictive to the point of setting up a sole source of supply.

Mr. Rice asked during Mr. John W. Leahy's testimony if a fork lift needs to be crated to be shipped.

Actually no fork lifts were ever crated as is shown by exhibits following: There is no question about excess expenditures on the part of Atlas in crating fork lifts as no fork lifts were ever crated.

Exhibit D-29-(a), cable CASAE 497 dated June 18, 1951, Casablanca purchase request.

Exhibit D-29-(b), memo, John W. Leahy to R. G. Sherfey, fork lifts, July 11, 1951:

Exhibit D-29-(c), statement, Cyril A. Millson, lieutenant colonel, T. C., March 28, 1952.

Exhibit D-29-(d), statement, James Gorman, Atlas dockman, March 28, 1952. Exhibit D-29-(e), statement, Arthur R. Seaman, Dade Bros. field supervisor, March 28, 1952.

Atlas engine"; New York office had no function of design in the case of items to be specially manufactured. They received designs and specifications from Casablanca after approval by the district engineer. We know of no instance in which vendors have changed this type of specification.

Vendors submit proposals listing their specifications; Atlas evaluates each bid as to job requirements.

Leahy testifies, "A piece of equipment with 150-horsepower engine, 157′′ wheel base and 6.25 something tire."

We state that this is not confining.

As an example of this: Requisition NY-865, approved by the district engineer and dated May 12, 1951, covered 41 each Flatrack Trucks.

Invitations for bids were sent out for these trucks to nine vendors who submitted proposals on standard manufactured items.

Purchase Order No. 1368, approved by the district engineer, was issued on June 6, 1951, for the above trucks, after Mr. Leahy had screened and rewritten the original requisiton; had accepted the vendor's own specifications and had recommended its acceptance; and he had issued a request for change order to substitute the type of axle.

Award was made on low price to the vendor most nearly meeting job requirements upon approval of the district engineer.

The above represents a typical example of procedure, handling and procurement.

Exhibit D-29–(f), requisition for 41 trucks, Mav 12 1951.

Exhibit D-29-(g), memo, J. W. Leahy to R. G. Sherfev, trucks, June 7, 1951. Exhibit D-29-(h), memo, J. W. Leahy to R. G. Sherfey, change order, June 26, 1951.

C. QUESTION

It was alleged that an administrative clerk in charge of the control desk revised specifications prepared by the engineering department although this person lacked qualifications for such purpose. (Leahy, pp. 893-900.)

Response of Atlas

The person at the control desk did not change specifications, but had to request changes on requisitions as to form, nomenclature, and extract from requisitions proprietary and mandatory items of Army procurement as is customary under Armed Service Procurement Regulations. All requisitions, before bid invitation and all purchase orders, before actual procurement, had to be approved by the business manager and/or the procurement director and also approved by the district engineer before vendor was awarded an order. Also, Mr. Leahy fails to point out that the business manager dealt with the procurement director and that it was the duty of the procurement director and the business manager to accept responsibility that Atlas (New York) act in conformity with established Atlas and Army purchase procedures.

The attached affidavits (D-30–(a) and (b)) refute completely the testimony of Mr. Leahy that the specifications of the electrical and petroleum, oil, lubricants departments were revised by the person in charge of the control desk.

Exhibit D-30-(a), statement, Wm. H. Stewart, electrical engineer, March 24, 1952.

Exhibit D-30-(b), statement, C. W. Meloney, petroleum, oil, lubricants engineer, March 24, 1952.

D. QUESTION

1

It was alleged that a buyer in the purchasing department called vendors to furnish specifications on concrete trucks that Atlas was required to purchase. (Leahy, pp. 905–906.)

Response of Atlas

In his testimony Leahy refers to the purchase of 30 transit mixer trucks, requested for purchase by cable CB-380-B, dated June 4, 1951, and requisition CBX-1110. Mr. Leahy's allegation refers to "concrete trucks." By this he means trucks to be used to transport transit mixers being purchased on vendor's specifications; the order was for 30 transit mixers to be mounted on appropriate trucks. It was necessary therefore, since the number of manufacturers of transit mixers is limited, and all makes of transit mix machines will not fit on every truck, to determine from each manufacturer what types of truck were appropriate for his mixer.

Atlas solicited bids and received proposals on transit mixers from 6 reputable manufacturers.

2

Award was made on purchase order 1407 for the mixers, from a district engineer approved requisition, and on approval of the ultimate procurement by district engineer as meeting job requirements.

The vendor of purchase order 1407 recommended five different makes of trucks which would satisfy the mounting requirements of his transit mixer.

Atlas solicited bids on five recommended appropriate trucks from five reputable vendors and made an award on the basis of low bid on purchase order 1413..

The requisition for trucks, and purchase order 1413 for trucks, had written approval of the district engineer for purchase, indicating that he was satisfied that the equipment met job requirements.

E. QUESTION

It was alleged that a great deal of equipment and material purchased did not conform to specifications and that there was indication that such materials could not be used without material alteration (Leahy, p. 934).

Response of Atlas

Atlas Constructors only purchase upon approved requisition by the district engineer based upon plans and specifications approved by him.

The district engineer approves, in writing, our purchase order before it is forwarded to the successful bidder. We do not have a record of any purchaserequiring substantial alteration.

F. QUESTION

It was alleged that specifications were ignored in the procurement of steel hangar from Pacific Iron & Steel Co. (Leahy, pp. 871-878.) It was further alleged that competition was eliminated; that the contract was let on a squarefoot basis as against lump sum or tonnage basis; that such pricing was unorthodox; and that this requirement could have been met from sources located on the east coast. (Leahy, pp. 879, 917, 919.)

Response of Atlas

On June 1, 1951, Mr. Lester Bozarth, representative of the district engineer, by written directive, ordered Atlas to obtain bids on a six-plane hangar based on plans and specifications prepared by the architect-engineer.

Proposals were received from: Pacific Iron & Steel, $938,052 f. o. b. Los Angeles; Luria Engineering Co., $963,000 f. o. b. Bethlehem, Pa.; United States Steel Export, $978,000 f. o. b. Ambridge, Pa. The Pacific Iron & Steel bid was for a complete six-plane hangar as per the plans and specifications of the architectengineer. The bids of Luria Engineering Co. and the United States Steel Export were for the structural frame only of a six-plane hangar as per plans and specifications of the architect-engineer.

Award was made to Pacific Iron & Steel on their bid of $938,052 which was not only low bid but included materials not included in the second and third bids. The purchase was made on a lump-sum basis, not as Mr. Leahy alleges on a square-foot basis.

These proposals were received during a period of time when Mr. Leahy was not in the New York office and award was made to the low bidder and approved by the district engineer.

Two bids were from firms located near the east coast.

Transportation of the hangar purchased from Pacific Iron & Steel will be made by water from Los Angeles, trans-Pacific and Mediterranean to Casablanca as arranged by the Transportation Corps of the United States Army. Evaluation of Pacific Iron & Steel purchase price, plus arranged transportation, compared with the rail to Atlantic seaboard and trans-Atlantic to Casablanca added to either of the other bidders, indicates the purchase from Pacific Iron & Steel to be still at the lowest total cost.

Exhibit D-33-(a), letter, district engineer to architect-engineer, hangar plans and bids, May 31, 1951.

Exhibit D-33–(b), cablegram, district engineer, Casablanca, to district engineer, New York, authority, July 23, 1951.

31,

Exhibit D-33-(c), letter, district engineer to Atlas, approval of purchase, July 1951.

G. QUESTION

It was alleged that a requisition came to the New York office for 80 fork lifts without any specification as to use and the fork lifts were purchased on the vendor's specifications. It was also alleged that this was an excessive order and that the fork lifts were crated for shipment although such procedure was unnecessary and expensive. (Leahy, pp. 908–911.)

Response of Atlas

The above question was fully answered by question I. 1. b. above.

2. PROCUREMENT IN EXCESS OF REQUIREMENTS

It was alleged that Mr. Sherfey, Atlas procurement director, ignored a directive of the district engineer to reduce by 11 the number of fuel storage tanks on order. (Leahy, pp. 884-891.)

Response of Atlas

Atlas did not receive a directive to reduce the number of fuel tanks on order. Requisitions specifying numbers and kinds of tanks were directed and approved by the district engineer on: January 25, 1951; March 14, 1951; April 27, 1951; Mav 25, 1951; June 7, 1951; July 12, 1951.

Purchase orders were written and approved by the district engineer on: February 14, 1951; May 4, 1951; May 22, 1951; June 7, 1951; June 8, 1951; June 27, 1951; July 2, 1951: July 27, 1951.

A letter PUA-67 dated May 2, 1951, addressed to PUSOM (Porter-Urquhart, Skidmore, Owings & Merrill) was issued by the district engineer directing them to prepare a new tank list. An information copy of this letter was sent to Atlas.

This letter referred to gallon storage requirements only and not to number of tanks required. This was not a directive to Atlas to do anything.

Fay, Spofford & Thorndike, subcontractors to PUSOM, did prepare and forward to Atlas through the district engineer a revised tank list which was received by Atlas July 20, 1951.

Mr. DONNELLY. Mr. Chairman, all of allegation I has to do with the procurement practices and procedures of Atlas organization in New York, and the source of these allegations is the former employee of Atlas Co., John W. Leahy, the department engineer, Atlas Constructors, from March 7 to August 3, 1951. I understand he is now working for a corporation separate from Atlas Constructors. I might advise the committee that the Department of the Army has brought down here from New York a qualified person and also furnished information with respect to the group of allegations in I.

Mr. FURCOLO. Before we get into that, I would like to ask the Atlas people if they know of any feeling which Mr. Leahy might have, either favorable or unfavorable, to the Atlas Co. I have scanned rapidly through the answer, and I have not seen anything to that effect in Atlas' answer.

Mr. McCLARY. All we can say is that Mr. Leahy was discharged by Atlas, on August 3, 1951, with the concurrence of the district engineer's office, for incompetency-acting on instruction of the district engineer's office.

Mr. BONNY. Yes.

Colonel HASEMAN. Yes.

Mr. FURCOLO. Was there any ill feeling toward Atlas Co., that he might himself have had, because Atlas had discharged him, even though they had been instructed to by the Corps of Engineers?

Mr. McCLARY. The last time I was him was on August 1. He was in our organization on that date, and the district engineer's representative and I talked the situation over, and I believe that Mr. Leahy, subsequent to his discharge, had filed suit, or said he would, but nothing has come of that.

(Off-record discussion.)

Mr. FURCOLO. The fact that Atlas people did not have anything to say in any way about it, has no effect on any statement Mr. Leahy, might have made, other than what you have already stated?

Mr. McCLARY. Honestly, we do not know one reason, none of us have talked to him.

DETERMINATION OF SPECIFICATIONS FOR MATERIAL AND EQUIPMENT BY VENDORS

Mr. DONNELLY. First, I want to ask you about item I-1, that Atlas had ignored the functions of the Atlas engineering department in the development of specifications of vendors, in the sense that the sellers to Atlas were permitted to determine the specifications.

Mr. McCLARY. With your permission I am going to read what we say on that, which I think is about the best way I can answer it. We looked through the published testimony that Mr. Leahy gave, and to the best of our ability, we have determined that this refers to the purchase of autos, trucks, forklifts, concrete trucks, medical supplies, shovels, tractors, spare parts and equipment, supplies of standard manufacture and commonly termed off-shelf items.