considerable difference of opinion as to how these cameras should be procured between various Government agencies and that one or more agencies insisted on IFB competitive bidding but was overridden and that authorization to procure first on sole source and finally on negotiated bids was issued.

The inherent dangers in the present weapon system procurement program are apparently minimized and appear to be completely ignored. Mr. Welch has clearly stated some of the dangers that exist in this program. There can be no question that under the weapon system procurement program almost all developments wil be controlled by the few "giant" industries. There will be no way for the Government to determine which items were developed by the various independent subcontractors. As a matter of fact, there is serious doubt as to whether there will be any part under this program for independent subcontractors and even more so in the case of small business.

Under present Government procurement methods drawings are required.. However, drawings are generally furnished only after completion of the contract. The purpose of this is to assure the Government of obtaining the very latest drawings complete with revisions, changes, etc. This may be excellent in theory but works to the extreme disadvantage of the Government. When the interest, and in some cases the avarice, of the individual contractor is taken into consideration, drawings are furnished at the latest possible date so that information will be kept from the Government and the public for as long a time as is possible.

To summarize, there are several methods of protecting the Government. The "shotgun" or "cure all" method of simply declaring by congressional act, Executive order, or by any other legal means that there will be no consideration given to prorietary rights is undemocratic and unnecessary. The simple and proper method is to ask for a clearcut statement from every contractor prior to award as to what proprietary rights exists and will be used in the completion of the award under consideration and what portion of the costs represents such proprietary rights. In addition, each contractor should be required to state that any item developed thereafter that has any proprietary rights will be disclosed to the Government immediately. Further that such proprietary items that were developed during the life of the contract were either developed as part of the contract and are absorbed in the charges under the contract or were developed independently of the contract and at company costs. Further that in the event the item is developed a company costs, the item is being supplied on either a no-cost basis or at some nominal sum. In addition, each contract should contain a clause stating that the Government has a right to all technical information and drawings at any time requested. In other words, such technical information and drawings must be furnished during any stage of the contract so that the Government will be in a position to supply such information to other contractors for competitive bidding purposes. In fairness to the contractor it should be stated that the information and drawings supplied are not guaranteed to be accurate and are without recourse to the contractor as to accuracy. A limit to the number of times such information can be requested by the Government would eliminate any questions as to costs. A limit to a nominal number of times (i.e., 5 or 10 times) during the life of the contract would not in any way increase the costs if made known at the time of bidding. Further it would eliminate the need for the Government of having voluminous correspondence and drawings on hand since it would be necessary to call for such information only as required.

Senator LONG. I believe we will have time to hear Mr. Harry Stern. of Action Manufacturing Co.

I will ask you, Mr. Stern, to just proceed and read your statement.. STATEMENT OF HARRY STERN, PRESIDENT, ACTION MANUFACTURING CO., PHILADELPHIA, PA.

Mr. STERN. Thank you, Mr. Chairman.

Action Manufacturing Co. is a small business situated in the northeast section of Philadelphia and employing approximately 125 men and women. We are primarily engaged in producing electro-mechanical mechanisms and instruments and in the overhaul and repair of

aircraft instruments. Our business was established in 1946 and has been operating since this inception.

The president and writer of this statement, namely, Harry Stern, is a journeyman toolmaker and a graduate mechanical engineer.

The purpose of this report is to bring to the attention of the proper people the difficulties experienced by our company, as well as other small businesses, in competing with the original manufacturers of aircraft instruments for the overhaul and repair of these aircraft instruments. The major reasons for our inability to compete in the overhaul and repair of certain instruments is due to the difficulty or impossibility of obtaining replacement parts and/or test equipment to meet the required Government delivery dates. Failure to meet the Government delivery dates has been the basis for rejecting our proposals or proposals by manufacturers in the same situation as our company. As a result of the long delivery dates promised by the manufacturers of these instruments who are in the only position to supply these parts and test equipment and due to the claim of some of these manufacturers that they have proprietary rights, a situation exists which is untenable as far as we are concerned. This claim of proprietary rights either results in an outright rejection to sell replacement parts and/or test equipment or the delayed delivery seems purposely designed to cause rejection of our proposal by the Government who has previously established the required delivery dates.

We believe that the Government has financed the majority (if not all) research and development work on the aircraft instruments for which we are trying to receive contracts for the overhaul and repair and that the claim of proprietary rights are strictly in the hands of the Government. It is inconceivable that any company would or could undertake the expenditures of millions in the development of an aircraft instrument based on the hopes of ultimately selling it to the Government or private industry. We believe that all of this research_and_development would be contracted by the Government through prime or subcontracts and therefore all developments, designs, parts drawings, tooling, specifications, test designs and test equipment, all belong to the Government and, if not turned over to the Government completely, should be available upon Government request on the behalf of the Government or on the behalf of an aircraft instrument overhaul shop contracted to do the overhaul and repair for the Government.

A monopoly in this situation is a simple matter where the manufacturer of the original equipment controls both the parts manufacturing and the retention of the test equipment design because any aircraft instrument overhaul shop would have to go to these firms and these firms only to purchase all parts and test equipment. By giving the overhaul shop unrealistic deliveries (if any) and by establishing exorbitant prices for their test equipment, if they entertain any desire at all to sell this equipment, they automatically disqualify any overhaul shop other than their own due to the inability of their competitors to obtain parts or equipment on time to meet the required deliveries (see Kollsman Instrument Corp. letter dated August 18, 1959, and our letter to them dated July 13, 1959).

Senator LONG. I will have the reporter insert your exhibits at the end of your statement. (See exhibit II, beginning p. 47.)

Mr. STERN. Yes.

Senator LONG. Go right ahead, sir.

Mr. STERN. This maneuver by certain of the original equipment manufacturers does not permit any company to compete with them for the overhaul of aircraft instruments if they wish to exercise the advantage of their monopoly. For, by forcing the Government to disqualify all bidders, due to the inability of small business firms to obtain the necessary repair parts, components, or test equipment from the only and single source, they alone can receive the award. It is therefore obvious that either the original equipment manufacturer should (1) not overhaul instruments or (2) not manufacture parts or, (3) turn over the parts prints to the Government (which has normally been paid for by the Government) for reissuance to other manufacturers so that they can produce the parts and test equipment competitively.

The original instrument manufacturer should be forced to compete on both the furnishing of parts and test equipment in the overhaul phase, although it is the writer's belief that small business concerns can do a much more effective job in the overhaul and repair of aircraft instruments and other instruments from both the delivery and cost factors. Also it is my belief that the Government should receive all the data for which it has paid and the right to go back to the original manufacturer in order to obtain any and all information inadvertently left out of the technical order manuals giving details on the overhaul and repair of these instruments as part of the original package. This information should be made available to the competing instrument overhaul shops at no cost so that in preparing a bid the instrument overhaul shops can give firm and fair prices. Furthermore, parts prints should be made available at all times so that the original manufacturer is forced to compete with other parts sources. Test equipment design (and test equipment made by the manufacturer with Government funds) should be available at all times so that the Government can be assured a competitive price and a reasonable delivery. In other words, once the Government has procured the original overhaul instrument or instruments from the instrument manufacturer all "know-how," equipment, design, and subsequent changes and improvements should become the property of the Government and be made available to firms interested in the repair and overhaul of aircraft instruments, where it is in the interest of the Government to do so. The claim of proprietary rights by many manufacturers is not valid and if checked into carefully, regarding the means by which these so-called proprietary rights were developed, would reveal in many cases that this company does not have any proprietary rights and that all proprietary rights rest with the Government.

The claim of proprietary rights creates a monopoly, tends to eliminate all competition, and places the Government in a position to accept all terms and conditions established by the original instrument manufacturer. This contributes to higher costs, longer deliveries, and may jeopardize the security of our Nation. Furthermore, this monopoly created by a claim of proprietary rights forces the Government to go back to the original manufacturer who can name his own price, his own conditions, and his own delivery, if at all interested in doing so. It can force the Government to give them all its overhaul

and repair work at the price and conditions they name. But, effect on small business is absolutely devastating and in many cases catastrophic because there is no opportunity for the small business to compete with all the odds stacked against it.

Enclosed is attachment A, illustrating a typical claim of proprietary item which is in reply to our letter dated 13 July and marked attachment B. Attachment C is a typical answer to our request for quote on aircraft instrument parts from the original manufacturer.

Experience has shown that in many cases where Government assistance is solicitated by us we can obtain delivery within 10 days where original promises were made for delivery within 6 months. Attachment D is a statement submitted to small business with our certificate of competency form after having been rejected by the Air Force office for our inability to meet required delivery on the proposal and attachment E is a copy of a rejection given us by small business which was based on our inability to obtain parts and test equipment from General Electric Co. in sufficient time to meet the deliveries. Although we were the low bidder we were disqualified. Attachment F is a list of some firms who have cooperated with us in obtaining parts and test equipment.

Is it necessary to read the exhibits?

Senator LONG. I believe we will put those in the record at this point. (Exhibits submitted by Mr. Harry Stern follow :)

(Attention of Mr. William D. Dugger, Instrument Supervisor)

GENTLEMEN: In reply to your referenced letter please be advised that we cannot supply you with the information you request, due to the fact that the items of test equipment in question, are proprietory to Kollsman.

Please be advised that each of the units utilize Kollsman synchros which are absolutely necessary for the operation of the equipment. The 120-day delivery date which was given to you for the test equipment is predicated on the lead time required for these synchros.

We have brought your problem to the attention of our repair department, and they have indicated that they would be receptive to repairing these items for

you.

If you desire any further information concerning this matter, please do not hesitate to contact us. Repair information requests may be directed to the attention of Mr. J. V. Connelly.

DEAR MR. ANDERSON: We have a prime contract with the Air Force for the overhaul of aircraft instruments of your manufacture. This is an altitude synchrotel indicator, Kollsman Part No. A25561 04 001.

We have all of the test equipment required for the overhaul of this item except for the synchrotel null setting equipment, Kollsman Part No. 6721-0005. In a telephone conversation with your Mr. Al Belliveau, he indicated that the schematics or drawings sufficient for us to make a mockup of this test equipment was available and he would send this information to me. This is more than I had hoped for and I was looking for this information to arrive by mail.

Failing to receive these specs, I called Mr. Belliveau today to see if he had sent them. Mr. Belliveau said that this test equipment had become obsolete and that he had information on the newer piece of test equipment that he would send me after he cleared with his supervisor Mr. Tony Mule. Mr. Mule then spoke with me and said the information was not available because it is a proprietory item. This stops me; I cannot proceed with the overhaul until I have this information. We would buy the test equipment from Kollsman except the delivery date is 120 days. We would be delinquent on our delivery schedule to the Air Force. Also we only have a small quantity of instruments to do and I don't think this null setter has a general application for other instruments.

This test equipment is not obsolete for our use and I would sincerely appreciate any assistance you could give us in providing the information needed to adequately test this instrument. If there is an alternate piece of test equipment that could meet the same requirements perhaps you could offer some help in that way.

(Attention of Mr. Lester R. Rubin, purchasing agent.)

GENTLEMEN: In response to subject request, we regret that we are unable to consider an order for aircraft instrument parts and must, therefore, offer no quotation.

Consistent with our policy on aircraft instruments, this would have to be our response to any other current or future inquiry for aircraft instrument parts. On existing orders that you may have, we would suggest that you take action to secure the required parts through military channels since they would be readily available to them.

Very truly yours,

E. J. WOOD,

AVIATION & DEFENSE INDUSTRIES SALES, By W. C. Rabe.

(Attachment D)

OCTOBER 7, 1959.

The following letter was submitted to the Small Business Administration, with a request for certificate of competency:

General Electric Co. was contacted by our facility in the presence of Government representatives from Middletown, and we were promised a delivery of approximately 6 months. This delivery, they assured us, would be the same for the Government, any competitors of ours, as well as for us; therefore, no better delivery can be obtained by any other facility. The Government has, however, offered us assistance in expediting delivery of these parts after receipt of this contract, consequently, an improved delivery may be gotten.

There is no doubt from the conversation with General Electric Co. that no other company could provide the Government with any better delivery than we can. The Government recognizes this problem and has therefore offered their cooperation in helping us with the acquisition of these parts after we receive the award of this contract.