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Do you run into these kind of things at all?

Mr. MANESS. I think it is unfortunate that upon calling the procurement agency he was advised, and improperly so, that they would open his bid or accept his bid as a good bid. I think it is one of the risks and gambles he took. I think the regulations require that the bid must either be in the hands of the contracting officer or in the pipeline of either the mail system or the Western Union, with certain restrictions to the effect that it had been mailed certified or registered in sufficient time to have been received. In that area I think there have been many rulings holding him nonresponsive. The fact he would have saved the Government money of course is legally irrelevant.

Mr. ROOSEVELT. In the case of the multiyear procurement, are you making any effort at all to interest the small business people to join in combinations in order to meet this kind of competition as is allowed under the act?

Mr. MANESS. The multiyear procurement, I am afraid, cannot be solved by our pooling provisions or our pooling efforts. Basically the multiyear procurement is not a consolidation of items. It is strictly a purchase of a single item or an item which has always been purchased. In the consolidation of purchases they have set up systems whereby they put related and nonrelated objects together. Where, heretofore, they may have made 11 purchases they are now making 3 or 4 purchases. It is being done under the guise or excuse of saving money for Uncle Sam through contract administration and getting a better price for a larger quantity.

It is in the area of consolidation where pooling could be entered into and we make every effort. We would rather fight the consolidation first rather than give in, but pooling could help in that area. Pooling could not help in the multiyear procurement.

Mr. ROOSEVELT. Where it can, however, is there some way in which we can advise those interested parties that "look, you are going to be out unless you do pool on this and you better go find your partners"?

Mr. MANESS. Our Washington office and our regional offices make every effort to advise on pooling. Unfortunately, pooling has never been a real success because of the difficult problems involved of getting separate companies together just for a purpose of bidding on certain contracts. But we will do everything in our effort to get more for small business, and if multiyear procurement stays we will have to find a remedy to help small business.

Mr. ROOSEVELT. This is really an area in which a small business procurement association could give really great assistance to its members if it were on the ball.

Mr. MANESS. I have always favored pooling, Mr. Roosevelt. Pooling could be successful. What you need is a strong manager or you need five or six concerns to indicate to one man "you run the show and we will follow you." But, invariably, that does not happen. That is the difficulty in the pooling system.

Mr. ROOSEVELT. I know it is not your proper function, but I hope the small business community itself will really look into this because I feel there is a lot of business they are losing that they would be able to take.

Thank you.

Mr. MANESS. Mr. Roosevelt, any area in Government procurement or any assistance whereby I can increase Government procurement to small business is in our area.

Mr. ROOSEVELT. Thank you, Mr. Chairman.

Mr. MULTER. Thank you very much. You have been very helpful to us. We appreciate your coming in and hope you will follow this up with additional information and discussion in the course of the day, and anything else you think will be helpful we will be very happy to receive for the record.

Mr. MANESS. Thank you, Mr. Chairman and members of the

committee.

Mr. MULTER. The committee will stand in recess subject to call of the Chair.

(Whereupon, at 11:30 a.m., Wednesday, August 12, 1964, the subcommittee recessed subject to the call of the Chair.)

(Informatnion referred to in Mr. Maness' testimony follows:)

GENERAL SERVICES ADMINISTRATION,
Washington, D.C., September 9, 1964.

Hon. ABRAHAM J. MULTER,
Chairman, Subcommittee on Small Business and Government Procurement, Se-
lect Committee on Small Business, House of Representatives, Washing-
ton, D.C.

DEAR MR. MULTER: As requested by the Honorable Eugene P. Foley, Administrator, Small Business Administration, there is forwarded for your information a copy of my letter dated August 21, 1964, in reply to Mr. Foley's letter of August 3, 1964, regarding our procurements for service station deliveries of gasoline and related products.

Sincerely yours,

LAWSON B. KNOTT, Jr.,

Acting Administrator.

GENERAL SERVICES ADMINISTRATION,
Washington, D.C., August 21, 1964.

Hon. EUGENE P. FOLEY,

Administrator, Small Business Administration,
Washington, D.C.

DEAR MR. FOLEY: This is in reply to your letter of August 3, 1964, regarding contracts for the furnishing of service station deliveries of petroleum products and other related services to meet the requirements of the Government.

As a matter of background information with respect to this commodity, we would like you to know that the amount of gasoline procured from commercial sources for Government vehicles is approximately 107 million gallons per year, which totals about $30 million. I am sure that you will agree that every effort should be made by this agency to negotiate contracts in this commodity area which will result in savings to the Government commensurate with the large dollar volume involved.

In our negotiations with the major oil companies for renewal of their contracts for the period of July 1, 1964, through June 30, 1965, our primary objective was to obtain company discounts commensurate with the past dollar volume of sales made by these companies through their retail outlets. We were successful in obtaining such discounts ranging from one-half of 1 percent to 4 percent from 10 of the major oil companies. In addition, contracts were negotiated with a substantial number of independent refiners, distributors, and service station operators at discounts ranging from 1 to 18 percent and in some instances independent service station operators offered discounts from posted pump prices ranging from 1 to 5 cents per gallon.

Company discounts are applied to the dollar volume of sales through their retail outlets based on delivery tickets submitted. The retail outlets of these companies offering discounts do not absorb any part of the discount.

In order to provide location coverage on a nationwide basis which would make available to Government vehicles sources of supply without undue travel, it was necessary to negotiate contracts with major oil companies who would not agree,

for various reasons, to grant a company discount. Contracts were negotiated with these companies on the basis of their agreement to comply with the provisions of the dealer participation amendment to the contract renewal notice (copy of the amendment is attached herewith). In brief, this amendment stipulates that the company agrees to notify its retail activities that the operator of a Government vehicle at the time of purchase of gasoline will ask for a discount from the posted pump price. The decision as to whether the retail dealer elects to give a discount is one that rests strictly with him. You will note in the attached amendment that under certain conditions the vehicle operator may make purchases of gasoline from the retail outlet at posted prices without regard to the discount price consideration.

We should like to point out that the current contracts as well as previous contracts negotiated with the major oil companies and the small business sector of industry have contained a provision that permitted any using activity to make local arrangements for obtaining price considerations with any of the dealers dispensing the products of a contractor. In essence, therefore, the provisions of the dealer participation amendment, to a large degree, makes known to all dealers that they may, if they so elect, increase their sales of petroleum products and services to Government agencies through offering discounts or other types of price considerations.

It is our position that the request for price considerations from a dealer does not create a hardship but affords the independent dealer an opportunity to obtain a considerable portion of the Government business if he determines that it is economically advantageous for him to do so. It is not, nor has it been, the policy of this agency to coerce or force in any way the small business sector of the industry to meet the requirements of the Government for petroleum products and related services on an unprofitable basis. On the contrary, every opportunity is afforded to the enterprising individual service station operator under the provisions of the contract to increase his sales if he elects to aggressively seek this business.

Sincerely yours,

BERNARD L. BOUTIN, Administrator,

AMENDMENT TO CONTRACT RENEWAL NOTICE
Period July 1, 1964, through June 30, 1965

Contract No. GS-OOS

BY THIS AGREEMENT, Subject contract, as amended, covering FSC Group 91, Part III, Gasoline, Lubricants, Fuel Oil (Diesel), Kerosene, and Related Services, is amended as follows:

DEALER PARTICIPATION:

The contractor agrees that he will notify all retail outlets dispensing its products that the Government vehicle operator expects to receive a minimum discount of two cents per gallon from posted pump prices at time of sale.

Before gasoline is dispensed into the vehicle, inquiry will be made by the operator of the vehicle as to whether a discount will be given by the dealer. The refusal by a retail outlet to discount sales of gasoline does not necessarily prohibit purchase of gasoline for emergency needs or when the posted pump price is less than the normal retail price, discounted by a minimum of two cents per gallon.

The contractor agrees that it will honor credit card invoices reflecting purchases by the Govrenment hereunder.

The contractor agrees to furnish the contracting officer two copies of the notice (s) sent to its retail outlets.

EXCEPT AS HEREIN ABOVE AMENDED, all other terms and conditions of this contract shall remain in full force and effect.

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APPENDIXES

APPENDIX A

(Correspondence referred to in testimony of George T. Stern, witness on behalf of Strategic Industries Association, follows.)

PROPRIETARY DATA CORRESPONDENCE-F111 PROCUREMENT-BY PNEU-HYDRO VALVE CORP.

GENERAL DYNAMICS/FORT WORTH,

February 9, 1962.

PNEU-HYDRO VALVE CORP.,
Cedar Knolls, N.J.

(Attention of G. T. Stern, President).

GENTLEMEN: As the result of the recent competition for the development of a new tactical fighter aircraft for the Air Force and Navy, General Dynamics/ Fort Worth and another prime contractor have been selected to undertake further detailed studies upon which the final contract award will be based. The development of the advanced fighter, now known as TFX, is in line with the belief of Secretary of Defense McNamara that overall program cost can be reduced and delivery dates expedited with the two services cooperating in design and production of a single air fighter to meet the needs of both. Production quantities promise to be substantial.

The results of the studies will be submitted to the Government by April 1 and final contract award will be made approximately May 1, 1962.

During the study period, General Dynamics/Fort Worth intends to develop firm planning to the maximum extent possible, in all aspects of the envisioned program. The determination of potential vendors to support the program is a matter of prime importance.

Pursuant to the policy recently implemented by the Department of Defense, General Dynamics/Fort Worth intends to include in our requests for quotations provisions in accordance with those in exhibit A, requiring that all selected sources agree to convey rights in data relating to the hardware on which the quotation is requested. The data will be acquired for USAF in accordance with MCP 71-77.

Please note that the terms of exhibit A provide that in those cases where the potential vendor refuses to furnish such rights in data under any circumstances or demands an unreasonable price therefor, General Dynamics/Fort Worth will seek another source. It appears to us that contracts for most future major programs will include similar provisions.

In our preliminary planning, we have included your company as a potential supplier in support of this program. It is requested therefore that you consider this aspect and advise us by February 19, 1962, whether or not you will be interested in remaining a potential vendor under the foregoing conditions. Any additional comments you might have in regard to this matter will be greatly appreciated.

Sincerely yours,

EXHIBIT A

CHAS. R. SCHULER, General Purchasing Agent.

A. That as to its own engineering data including drawings, background information and foreground information and proprietary data for the item(s) being purchased under any proposed contract, no restrictions as to Government will be placed thereon by the contractor;

B. That no claim of proprietary rights thereto will be interposed by the contractor;

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