Mr. HÉBERT. Mr. Courtney, is Captain Wells present? Mr. HÉBERT. Is he present? Mr. COURTNEY. Will you come forward, sir. Your first name, rank, and official position, now and previously, when this document was issued? Captain WELLS. Capt. George C. Wells, U.S. Navy, Director of Contracts, Bureau of Ships, since July 1960. Mr. COURTNEY. Since July? Mr. COURTNEY. You have not left the position in which this directive, or from which, this direction was issued? Captain WELLS. No, sir. I am now the Director of Contracts. Mr. COURTNEY. Director of Contracts in the Bureau of Ships? Mr. COURTNEY. You are familiar with the policy statement which Mr. Jonas spoke of as having been issued? Captain WELLS. Indeed I am. Mr. COURTNEY. On what authority did you issue this policy directive? Captain WELLS. On my understanding of instructions issued orally through the Office of the Chief of Naval Material, stemming from difficulties we had in an earlier case in which we were severely critized for causing undue expense to firms found subsequently not qualified, and believed earlier to be not qualified, to carry out procurements. Mr. COURTNEY. Orally from whom? Secretary BELIEU. I believe this came from a conversation between myself and the Chief of the Bureau of Ships-if I may intrude. I think so. We have had difficulty in attempting to do a judicious procurement exercise in areas of sole source procurement where we make a judgment that sole source is the best solution to some of the requirements of equipment we needed at that time. Obviously, people are entitled to have business, and desire business. When they hear, either through the process of synopsis or through other sources, that a contract is in the offing, they quite often come in. Some are knowledgeable and some are not. Those who are knowledgeable and have what looks like proper qualifications, we obviously consider. Many people sometimes bid and do not know——— Mr. COURTNEY. Let us ask specifically Mr. HARDY. I would like to stay on this point of policy. Mr. COURTNEY. Yes. We know you, Captain Wells, issued the policy directive? Captain WELLS. Yes, sir. Mr. COURTNEY. Upon whom are we to rely as having been the author and director of the policy? Captain WELLS. I believe Mr. BeLieu. Mr. COURTNEY. Mr. BeLieu, do you take the responsibility? Secretary BELIEU. Obviously, I take the responsibility for anything in my area, Mr. Courtney. Of course, Mr. HARDY. I am a little sick of that kind of situation. I know then technically as Secretary, you have got the responsibility, but by golly, I think we should know who down the line did these things, and if they were done without your approval, or on somebody's supposition you would approve it, I think we should know it. Mr. HÉBERT. Now, I think Mr. Hardy has raised a very important point. That is, we appreciate the fact that you will take responsibility, but we are trying to get to the individual who did it. This has been a long struggle through many, many years. We are still trying. We will try in this case. Did somebody tell you, or suggest to you, this be done, and that it be kept a secret? Secretary BELIEU. No, sir. Mr. HÉBERT. Just exactly what happened? Or did you devise this? As I say, we understand your position of wanting to accept responsibility. Secretary BELIEU. I understand that. Mr. HÉBERT. I wouldn't expect less of you, knowing you as I do you will accept the responsibility-but we want the man who is actually responsible. Secretary BELIEU. In this particular case, Mr. Chairman, it is my recollection at the present time that because of the lack of clarity of regulations and lack of standard procedure that would satisfy every person who came knocking at the door, or who was invited, we had several discussions on what the regulations should include; that is, should we go forward to the ASPR committee and attempt to change the armed services procurement regulations. At the same time there were discussions in the Office of the Secretary of Defense on similar subjects. It takes time to change regulations. It seemed to me logical at that time that people who were not considered qualified, even though we might make an error in judgment, should not be put to the expense-it is expensive to bid on equipment like this, or most equipment-I do not remember issuing any instructions Mr. JONES. I might be helpful, that back in March 1961 in reply to a congressional inquiry you said something of this nature: The history of this procurement has indicated to me that our policy with respect to honoring requests for proposals from unsolicited firms in such cases should be examined and I have directed that this be done. Following that you also indicated— As I indicated to you in my letter of March 2, 1961 Mr. HÉBERT. May we identify the document. Mr. JONES. These are letters. The first letter was written to Mr. Cahill on the 2d of March 1961. Mr. COURTNEY. Mr. Cahill, Member of Congress. Mr. JONES. Yes, House of Representatives. And the second was dated May 16, also to Mr. Cahill: As I indicated to you in my letter of March 2, 1961, the history of this procurement has demonstrated to me that our policy with respect to honoring requests for proposals from unsolicited firms should be examined and I have directed this be done. My own study of the case has been most searching, as I believe you are aware, from this. However, I am convinced that the Bureau's actions and decisions in this case were made in the interest of giving every consideration to the company and of seeking the maximum practical competition. Mr. COURTNEY. How does that lead to a conclusion which effectively excludes competition? Mr. JONES. This leads to the conclusion that subsequent to having issued these letters we discussed this matter among the bureaus and in the Office of Naval Material in an attempt to Mr. COURTNEY. "We" is specifically whom? Mr. COURTNEY. Who? Mr. JONES. Office of Naval Material. Mr. COURTNEY. Who? Let's get down to who. You? Who else? Mr. JONES. I would have to get the names of the people who attended these meetings. In one instance we discussed it in Mr. BeLieu's office with Mr. Farnham and Miss Brady, and the other instances we Mr. COURTNEY. Whom? Mr. JONES. Mr. Farnham, Larry Farnham, and Miss Alice Brady. Secretary BELIEU. We would be happy to furnish any records we have, Mr. Chairman. Mr. Farnham is a member of my personal staff in my own office. Including the papers pertaining to changes in ASPR-anything that is pertinent. There has been no question in my mind this is a procedure which needs clarification. I will make no excuses for the length of time sometimes it takes to change or add to procedures. As Mr. Jones testified, this action took place in September. Now, it looks like we may be in position to have some change in ASPR. Mr. HÉBERT. Mr. Secretary, I don't think the committee is criticizing what you did. Secretary BELIEU. I understand. Mr. HÉBERT. I personally subscribe to such order as you have issued. What I object to myself, and am concerned about, is that if you didn't tell anybody about it, how would somebody know about it? If a firm wants to bid and spend money-it is their money. They should be allowed the opportunity of bidding. How do they know they can bid if you don't tell them they can? The order is perfectly proper, as I see it. However, if you keep it locked up in the manual, only put out to the people in your shop, how does the contractor know about it? Secretary BELIEU. I have no argument with the chairman's state ment. Mr. HÉBERT. That is the point. Mr. HARDY. The question is, when did the policy become effective? Mr. JONES. This particular procurement we are talking about was synopsized, I might point out, and as a consequence anyone who read the Commerce Daily Bulletin would have knowledge that the procurement was being made. Mr. COURTNEY. You are speaking about PRC-41. Was published in the Commerce Bulletin? Mr. JONES. Yes, sir. Mr. COURTNEY. At what time? Mr. JONES. I don't recall the exact time. Mr. JONES. This is March 23, 1962. Secretary BELIEU. What the chairman is talking about is a different thing. It is true this particular thing was synopsized. That doesn't solve the policy question you asked. Mr. HÉBERT. That is right. Mr. COURTNEY. The question is how would a prospective bidder know that you had adopted a policy in September 1961 which would exclude him from bidding if he had not theretofore been chosen as the sole source? Mr. JONES. He would not unless he was aware of the procedures which were formalized in the Bureau of Ships, and had been used in the Bureau of Weapons in a similar manner. There was at that time, Mr. Courtney, no basic navywide policy which had been formalized, nor was there such policy which had been formalized in the armed services procurement regulation. Mr. COURTNEY. So he could spend his money fruitlessly, without knowing whether or not he could get in the house? Mr. JONES. I don't see how he would spend his money fruitlessly if he was unaware of the specifications and drawings and the invitation, because in these instances he would not have access. Mr. COURTNEY. Then let me go back: Then would you say that this directive which you will get for us-or policy statement, or whatever it is would prevent you, and the prospective bidder would be told that he would not be given specifications and drawings? Mr. JONES. But he would be told in this case. Mr. HARDY. How? Mr. JONES. If he was not included as one of those mentioned in the determination and finding, or considered to be qualified by the contracting officer, he could approach the procuring activity to indicate his qualifications. The contracting officer at that activity would entertain the information which he submitted. If that information appeared to indicate that the contractor had the capability of performing, a comprehensive and objective evaluation would be made of the contractor's plant facilities and other abilities. If as the result of this evaluation it is concluded that he does have the capability, he will be given an invitation. This is the essence of the directive. Mr. COURTNEY. I think, Mr. Chairman, we will have to pass this question for the moment, until we see what the directive does, or the policy statement does, precisely. Mr. HARDY. Let's see what it does, and also see where it is, and how anybody would actually get to it. Mr. JONES. It would be accessible. Mr. HARDY. That is after it is published. Mr. COURTNEY. Now, Mr. Cruden, just to go back for a minute, I have one question or two questions on your analyses here. First, I understood you to state that the $4,373,000 figure which is attributed to Collins in your analysis, is not a final figure; is that correct? Mr. CRUDEN. That is correct. This figure would become a maximum ceiling in a letter contract. That figure would also become a maximum ceiling in a definitive contract to follow the letter contract. Mr. COURTNEY. This is the upper limits of any cost, but does not necessarily represent the final negotiated figure. Mr. CRUDEN. That is correct. We hope, and intend, to negotiate downward, below this figure. Mr. COURTNEY. In your analysis you spoke of differences in the bill of materials. What were the differences in the bill of materials between the two contractors? Mr. CRUDEN. I can answer that two ways Mr. COURTNEY. In dollars only. Mr. CRUDEN. Mr. Courtney, I think I should make a general statement before I answer this question. Mr. COURTNEY. I won't forget the question-I want to know the dollar difference. Mr. CRUDEN. There is a general statement that I should make about the detailed comparison of the proposals of the company element by element. I stand ready to furnish this committee and to you every fact I know, and every opinion and conclusion that I know. I understand from our Navy counsel that there is such a thing as a business confidential type of thing which we are obligated to protect. The Collins Co. was contacted to ascertain whether they wished their information to be treated in a business confidential manner. They said the details of their hours and rates they would appreciate being kept in that category. I therefore wish to report this fact to the committee. I would like to also state that we are in a somewhat peculiar position before the committee in that we are about to negotiate a contract, or take a look to another alternative, if the outcome of this hearing should be such that we should make the decision in the Navy Department to resolicit, which we now think is not a direct possibility but could happen, we think that the integrity of a resolicitation would be lost if we disclose the details of the Collins-all the Collins' hours, rates, and dollars. Mr. HARDY. I don't think you asked for that. Mr. COURTNEY. The question is, what difference is there in dollars between the two-the total? That discloses none of the detail, but certainly the totals would have some relevancy. The total difference between the two. You can express it in percentage of dollars if you cannot do it otherwise. Express it in percentage. Mr. CRUDEN. I think that I can release that figure without violating this point that I made. Mr. COURTNEY. Total, now. Mr. CRUDEN. The difference in dollars is $321,000, but I would like to qualify my Mr. COURTNEY. Wait-$321,000 difference in the bill of materials? Mr. CRUDEN. Yes. Mr. COURTNEY. Difference? Mr. CRUDEN. There is a difference-$321,000 difference, yes. And by percentage this represents on the order of 14 percent-between 13 and 14 percent difference-and I would like to qualify-this is on the radio set only. Mr. COURTNEY. Roughly 14 percent difference. 86236-62- 4 |