(Attachment E) SMALL BUSINESS ADMINISTRATION, ACTION MANUFACTURING CO., INC., Philadelphia, Pa., (Attention of Mr. Harry Stern, president.) GENTLEMEN: Reference is made to your application for a certificate of competency, COC-III-223, relating to the proposed procurement under RFP 36-60060-5068, issued by the Middletown Air Material Area, Olmsted Air Force Base, Pa., for repair of Air Force instruments. The Small Business Administration has given careful consideration to the application of your firm for a certificate of competency, and finds no sufficient reason for reversing the decision of the contracting office. Consequently, this Agency has declined to issue a certificate of competency in behalf of your firm. We regret that conditions present do not justify issuance of a certificate of competency in this instance. I trust that your company will continue to avail itself of the many small business aids offered by this Agency, and hope that we may be of service to you in the future. Sincerely yours, The following is a list of noncooperating firms: Kollsman Instrument Co., Elmhurst, N.Y. G. M. Giannini & Co., Inc., Pasadena, Calif. Avion Div., ACF, Paramus, N.J. Airesearch Mfg. Co., Los Angeles, Calif. Bendix Aviation Corp., Montrose Div., South Montrose, Pa. Western Electric Co., New York, N.Y. The following is a list of firms who have been cooperating in supplying parts, information, and test equipment: Senator LONG. I want to ask you a question. Let me see if I understand this. Your business is engaged in overhauling and repairing instruments, if I understand you correctly? Mr. STERN. We actually have three divisions. We build mechanisms like fire control instruments for tanks for the Government, like periscope mounts, superelevation transmitters, and other similar items. We also make artillery fuses. Senator LONG. What kind of fuses are those? Are they mechanical or electrical? Mr. STERN. Mechanical fuses. Senator LONG. What else do you do? Mr. STERN. Of course, we have the overhaul instrument department, overhaul and repair. Senator LONG. How many people do you have engaged in your instrument overhaul repair department? Mr. STERN. Approximately 25. Senator LONG. Twenty-five? Mr. STERN. That is correct. Senator LONG. When you have to repair an instrument, I take it, you bid on that work; do you? Mr. STERN. Yes. The normal procedure is the Government usually puts out a proposal to those who are qualified, and we are one of the qualified overhaul shops, and they make reference to certain technical orders and manuals which have been compiled primarily for the overhaul and tests of these aircraft instruments. Based on what we read in the technical manual, we compute our price and we submit a bid on that basis. However, we have learned that many of the instruments made by certain companies, make it a waste of time to try to bid because they will not cooperate. They are in the overhaul business themselves and therefore, since they control the part manufacture and the test equipment, we realize it is foolish. We waste a lot of time trying to compete with those companies which are indicated on the list shown as attachment F (see p. 49). Senator LONG. It seems, if I might just read from one of your exhibits, that this was the case where you wanted to get some information about some equipment so you could overhaul it. The manufacturer of the equipment appears to have been the Kollsman Instrument Co. They say: 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 proprietary 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 leadtime 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." (See exhibit II, (A), p. 47.) It states that copies were sent to Mr. J. V. Connelly. What they are saying is, "Sorry, we can't provide you with the information to fulfill this contract. Now, if you want to talk to us we will be interested in taking your contract over." Mr. STERN. That is correct. But actually there is a long story behind the whole thing. I cannot say that this particular instrument, but I would venture to say, it is my belief, that Kollsman was paid for the development, research and development of this particular instrument, and that as part of the Senator LONG. What kind of an instrument is it? Mr. STERN. It is an aircraft instrument which fits into the panel. Senator LONG. Let me ask you, Do commercial planes use it as well as Government planes? Mr. STERN. No. It takes many years before it sifts down to the standard where it is used by commercial planes. In other words, it is primarily made for Government usage. Senator LONG. The probabilities are that all of this information was paid for by the Government in research contracts? Mr. STERN. That is right; and the tech manuals, the manuals which are issued, with the instruments as a package are designed to help the men in the field, and help on overhaul shops, such as ours, to overhaul these instruments after so many hours of flying time. Now, the Government accumulates these instruments, and puts out bids for their overhaul. In the technical manuals which have been used with the instrument they are supposed to contain all the information necessary to overhaul these instruments. However, reference is made in many cases, depending on the manufacturer, merely to a Kollsman, let us say, part number so and so, a piece of test equipment. Now, this design which has been paid for, for this test equipment, and which is actually a part of the package for checking these aircraft instruments, should be available to the overhaul shops and, of course, to the Government which has paid for it, and should not merely be a number which is merely a reference number. We are forced to go back to Kollsman to get the data and, of course, they claim-and in this particular case-that it is their design and their test equipment, and they have proprietary rights and, therefore, they do not have to release this information to us. Yet you cannot possibly overhaul this aircraft instrument without that design or without that piece of test equipment. The Government has already paid for it and now the Government has to go back to Kollsman and give them the overhaul contract unless there is some other way of obtaining this information. Of course, normally the prices of the companies who originally manufactured the instruments run anywhere from twice to 10 times the price that it takes for a smaller shop to overhaul these instruments. Senator LONG. Let us see if I have this straight. Here is a situation where the Government paid to develop an instrument, plus an instrument to test the instrument. Mr. STERN. That is correct. Senator LONG. The purpose of testing the instrument is to make the original instrument work, to overhaul it, repair it, and see if it is working right. Mr. STERN. That is correct. Senator LONG. But the Government has paid to develop both. The Government paid for all of this? Mr. STERN. That is correct. Senator LONG. If you, as a small businessman, want to compete with the fellow who developed this at Government expense, and make a better bid or a better offer to the Government, you are in the position that you cannot get control of either the information or the equip ment Mr. STERN. Or the parts. Senator LONG (continuing). Or the parts that the Government paid for, so that you could compete with these people? Mr. STERN. That is right. Senator LONG. The result is that you are left in the position where you are completely at the mercy, and the Government is also at the mercy Mr. STERN. The Government is at the mercy. Senator LONG (continuing). Of the very people they have already paid for the technical information. Mr. STERN. That is correct; and, firstline aircraft could be waiting on the ground for these instruments, and if a company, a large company, should decide they cannot give delivery for 6 months, and since they control the part, and since they control the test equipment, they can tell the Government, "You will have to wait 6 months for this," and we may have first-line fighter equipment waiting on the ground, waiting for these instruments. It therefore jeopardizes our security because the cooperation by the various companies controls our own security. Senator LONG. Let me see, where is this outfit, this Kollsman Instrument? Mr. STERN. Kollsman is in New York. Senator LONG. Where is that, New York? Mr. STERN. In Elmhurst, N.Y. Senator LONG. Well then, if you had some planes, let us say, out in Okinawa, and somebody wanted to do some repairing on them, he would have to wait until Kollsman would be ready to send him the parts? Mr. STERN. That is right. Senator LONG. Besides, he would have to comply with their terms and conditions? Mr. STERN. That is right, unless, of course, the Government creates, that is, forces Kollsman to get out of the overhaul business, in which case they would merely sell the parts and test equipment. There would not be that incentive to control the overhaul phase of the instrument, aircraft instrument, business. Now the overhaul seems like an insignificant part, but it happens to be a very significant part of aircraft instruments because aircraft instruments are designed to operate for a certain period of time and then they require overhaul, and during the life of an aircraft instrument it may be overhauled 10 times, depending, of course, on the type of instrument, and the nature of the instrument, and the usage it has received. So that this, what is considered to be an inconspicuous part of aircraft instruments, can turn out to be the most important part because you have aircraft waiting for these overhauled instruments, and we have had many examples where the Government has practically been sitting on our doorstep waiting for the instruments to be gotten out because there are first-line aircraft waiting in line to put them in the air. Senator LONG. Would you just give me a good example or, perhaps even an extreme example of something that might have happened along that line that you know of? Mr. STERN. Just a few months ago we were working on certain aircraft instruments, the need of which was so great, I do not think I should give too many details. Senator LONG. Were there airplanes in the vicinity that needed the instruments? Mr. STERN. Yes, that is correct. Senator LONG. And they could not be taken off safely? Mr. STERN. Because they did not have those instruments. There were none in supply, and they were dependent entirely on our overhaul to get them flying. Senator LONG. The aircraft were located in the vicinity where your shop was? Mr. STERN. No. I think it was somewhere in the airfields in Texas, in our own country. Senator LONG. What was your problem? How long did it take you to get the job done? Mr. STERN. We got the job done, but I merely want to point out what could exist. We were able to, of course, get these parts through certain cooperating companies, and we were able to meet the deliveries and get the aircraft off the ground. But suppose a situation existed where the same overhaul was in the hands of a larger company which controlled every aspect of it and they did not want the contract, or said they were too busy, or had a different schedule. It would be difficult to get these companies to cooperate in the same way that we cooperate even though we do not have the control of the test equipment nor the parts. Senator LONG. Did you meet your delivery date? Mr. STERN. Oh, yes. We met our delivery date. That is an example of where we met our delivery date, but, of course, we have instances here, and I have letters, primarily from General Electric and Kollsman where we know that since they are in the overhaul business, and since they control the sale of parts, and since they control the test equipment, we cannot get any cooperation from them. The fact is I have in my exhibits one of the letters from small business in which we were turned down, although we were the low bidder on General Electric instruments, where we could not purchase the parts, and they were-well, you can see the letter. I would like to read the letter or one of them. 3 Senator LONG. Which exhibit is that? Mr. STERN. I believe that is attachment C (see p. 48). It says: 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 will 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. Of course, this is not always true because in the preceding exhibit we had Government people on the phone with General Electric and they told the Government representatives, as well as us, that the Government would have to wait 6 months, like anybody else, or any of our competitors, for any of these parts. Yet we have instances where we needed these parts, and the urgency for these instruments was very great, and we utilized the priority form through Wright Field and we obtained these parts in 10 days through Government pressure. So, therefore, these parts were available. But the 6 months delivery causes us 3 See statement by General Electric, Appendix X, p. 435. |