the remaining 313 parts we found that no technical data were available in the files or the Government did not have a right to use the data for procurement purposes.

To illustrate, 85 contractor fabricated parts having a total price of $1,450,818 were purchased from a certain aircraft supplier. The Air Force purchased 21 of these parts and the Army purchased 64. The parts purchased by the Army were for equipment originally acquired under Air Force contracts. We found that the Air Force had complete technical data for 13 of the parts and incomplete data for the other 72 parts. The Air Force had unrestricted rights to use the data for 78 of the parts and had not determined the Government's rights to data for the other 7 parts.

We believe that, had the Air Force and Army attained effective control over the technical data in this case, all 85 parts could have been considered for competitive procurement and, under the conditions which existed, at least the 13 for which complete data were available should have been considered for competition. The following example illustrates some of the conditions disclosed by our review of purchases from this supplier.

Cover assemblies: The U.S. Army Transportation Materiel Command purchased 541 cover assemblies for $16.72 each, or a total price of $9,043.49. A sample of this item is available for your inspection. (Mr. Newman indicates.)

Mr. CAMPBELL. It would appear that the fabrication of these cover assemblies involves merely the cutting and sewing of canvas duck and attaching a red strip of cloth bearing a warning to "remove before flight." The Air Force had unrestricted rights for this part.

In another case we reviewed 39 contractor-fabricated parts having a total price of $945,268 purchased from a supplier of aircraft parts and equipment. The Air Force files contained complete data for 19 of the 39 parts. Data on another 14 parts were complete except for current revisions for some of the drawings. The Air Force records showed that the Government had unrestricted rights to use this data for 33 parts, and on 6 parts the Government's rights to reproduce the data in its possession had not been determined. We believe that competitive procurement should have been considered for at least 19 of the items for which the Air Force had complete technical data. We believe that current data should be obtained as early as possible in all cases where the Government has unrestricted rights to use the data, including the 14 just mentioned. We also consider it essential that the Air Force determine its rights on the other six parts. Following is one example of conditions we found relating to purchases from this supplier:

Flat washer: Warner-Robins Air Material Area, Georgia, purchased noncompetitively 143,300 washers at 8 cents each, or a total of $11,464. We also have a sample of this washer.

(Mr. Newman indicates.)

Mr. CAMPBELL. The Air Force had complete technical data for this washer and unrestricted rights to use the data for procurement purposes. Air Force technicians informed us that they considered this part to be suitable for competitive procurement.

RECEIPT, CONTROL, AND USE OF TECHNICAL DATA

During our review we looked into conditions existing in the Air Force, Army, and Navy with regard to the receipt, control, and availability for use of aeronautical spare parts technical data furnished to and paid for by the Government under defense contracts. Previous reports on this subject were issued to the Congress in May 1959 (B-133168) concerning the Air Force and in January 1960 (B-133263) concerning the Navy. In our initial review of the Army and followup review of the Air Force and Navy, we found a general need for more effective control over technical data bought under prior contracts. A brief résumé of the conditions we found at each service follows:

Department of the Air Force: Our May 1959 report on the Air Force concluded that the maximum benefits of competition had not been realized in the procurement of military equipment, components, and spare parts because of (1) inadequate provision in contracts for use by the Government of contractor-furnished data acquired at Government expense, (2) unnecessarily restricted interpretation by the Air Materiel Command, Wright-Patterson Air Force Base, Ohio, of the Government's rights where use of data was not expressly restricted, and (3) inadequate controls and procedures for the receipt and use of such data. Our report also stated that the Air Force had expressed general agreement with our findings and recommendations, and enumerated the corrective actions which the Air Force had initiated.

Our followup review disclosed no instances where the Air Force had failed to include unequivocal provisions regarding the Government's rights to technical data in contracts awarded since our previous review. We therefore conclude that the Air Force has taken corrective action on the first of the above deficiencies.

With regard to the second deficiency, we examined the records maintained by the Air Materiel Command of the Government's rights to use data obtained under 254 contracts. We found that unrestricted rights had been established for 229 contracts, a determination had been made that the Government had no rights to use data furnished under 4 contracts, and no determinations had been made for 21 contracts. We therefore conclude that although substantial progress has been made by Air Materiel Command since our first review in 1957-58, there is a continuing need to establish the rights of the Government to use data furnished under a sizable number of older Air Force contracts. We believe, however, that this need would be readily met if the Air Force were to adopt an active program of maximizing competitive procurement of replacement spare parts. Such a program would require determination of Government rights to use the data which pertain to any equipment still in use and which were furnished under these older contracts.

With regard to the third finding in our previous report, we find that little progress has been accomplished in the establishment of adequate procedures and controls over the receipt and shortage of contractor-furnished technical data. For these data to be useful in the procurement programs of the Air Force, they must be readily available to procuring officials and there must be assurance that they

are complete and current with regard to all changes made in the equipment to which they pertain.

Department of the Navy: Our January 1960 report described what we believed to be serious deficiencies in the Navy's receipt, control, and use of contractor-furnished technical data. These included (1) lack of any assurance that all drawings required to be submitted by contractors are received, (2) failure to use drawings for advertised procurement, and (3) indications of misuse by Aviation Supply Office of the authority to negotiate. The Navy generally accepted our findings and informed us of several corrective actions that had been taken.

With regard to the first of the above findings, we did not make a detailed examination during this review of the controls over receipt and storage of Navy drawings. We did, however, search the technical data files of the Aviation Supply Office for the drawings applicable to 126 of the spare parts included in our examination. We found complete and current drawings for 104 parts and incomplete of noncurrent drawings for 22 parts. While working at contractors' plants we also determined for a sample of 194 parts that complete and current technical data had been delivered to the Navy for 137 parts. Complete data applicable to the remaining 57 parts had not been delivered to the Navy for a variety of reasons. We conclude therefore that, although the Navy files contained complete and current technical data in a large percentage of the cases examined, there is still a need for improvement in the Navy procedures for controlling receipt of technical data.

With regard to the other two findings, we found that little progress had been made in using the technical data as a basis for competitive procurement, and there continue to be reasons for our doubting that many of the findings and decisions to negotiate purchases constitute proper use of the authority to negotiate when it is impracticable to obtain competition. For example, we found that a large quantity of the technical data furnished by contractors was inscribed with legends which stated restrictions on the rights of the Government to use the data. Although in most instances these restrictions were inconsistent with the provisions of the contracts under which the data were furnished, the Navy did not question their validity, and they became the basis for justifying noncompetitive procurement of so-called proprietary items. Also, at the Navy Aviation Supply Office we found that procurement of aeronautical replacement spare parts amounted to about $742 million during the 18-months period ended June 30, 1960. Of this total amount, more than $705 million, or 95 percent, was procured under negotiated contracts and more than $534 million, or 75 percent, of the negotiated amount was procured for spare parts bought on a sole-source basis without any effort to obtain competition. It was from this volume of negotiated procurement that we found many instances of noncompetitive procurement in which the contractors who received the award purchased the parts entirely from their subcontractors. These prime contractors frequently had more than one source available to them and did in many cases solicit competition.

Department of the Army: This was our initial review of conditions existing in the Army with regard to the receipt, control, and use

of contractor-furnished technical data on aeronautical replacement spare parts. Our review was confined to one activity, the U.S. Army Transportation Materiel Command, St. Louis, Mo., the Army agency responsible for aviation supply support.

We found, in general, that the Transportation Materiel Command did not consider the contractor-furnished data in its files to be adequate for procurement purposes and, further, that it did not have any effective means of determining the rights of the Government to use the data for competitive buying. We were informed that the drawings and other data available to the command were confined, for the most part, to those required in operations maintenance and supply support. The command took the position that what the Government buys from the prime contractor in regard to drawings and specifications is the responsibility of either the Air Force or the Navy and that the Army has little information on the Government's right to use the drawings. It is our opinion that, since the U.S. Army Transportation Materiel Command has assumed the responsibility for procuring its own replacement spare parts for equipment supplied under Air Force and Navy contracts, it should also assume the responsibility of maintaining, or obtaining access to, complete technical data files suitable for procurement purposes as well as up-to-date information on the Government's right to use such data.

EFFECT OF COMPETITION ON PRICES PAID

In an effort to obtain an indication of the effect of competition on prices of aeronautical replacement spare parts, we reviewed a number of instances where the military services changed from a sole-source to a competitive basis of procurement. The price reductions in these instances mounted to as much as 95 percent with an average decrease for all instances of about 30 percent. We found that new sources of supply received the competitive awards in more than 70 percent of the instances. We believe that it is not unreasonable to expect that, had the 2,770 kinds of parts included in our review been procured competitively, upward of $30 million could have been saved by the Government. For example:

Shaft: The Air Force purchased under competitive conditions 200 shafts. Three bids were received and the contract was awarded at $8.77 per unit, or $1,754. This part had previously been purchased noncompetitively from a supplier whose bid price for these 200 units was $39.46 per unit, or a total price of $7,892. This is $6,138 higher than the contract award price.

(Mr. Newman indicates.)

Mr. CAMPBELL. Bracket assembly:

The Air Force also purchased competitively 2,458 bracket assemblies. The award was made at 88 cents each or a total price of $2,163.04. These assemblies had previously been purchased noncompetitively from a supplier whose bid price on this purchase was $11.11 per unit or $27,308.38. This is $25,145.34 higher than the contract award price.

70893-61-pt. 1——2

(Mr. Newman indicates.)

Mr. CAMPBELL. Accidental competitive procurement resulted in a price reduction of $25,000: We would also like to cite a case where a substantial price reduction was made quite accidentally. Although the method of obtaining competition in this case is unusual, we believe it illustrates the price reductions that can be obtained through competitive procurement.

Warner-Robins Air Materiel Area proposed to purchase from a recommended sole source 618 Lockfoam parts kits. Each kit consists of one 3-gallon drum of resin and two 1-gallon jugs of foam and is used in the repair of propeller assemblies. The justification for sole-source procurement stated that the drawings and specifications necessary to allow advertised procurement were not available and that a single manufacturer would be the only firm solicited, because it was the only known source with the product knowledge and capability to furnish items acceptable to the Air Force.

Although it was the intent to solicit a proposal from the previous supplier only, requests for proposals were inadvertently forwarded to several air procurement districts. Eleven potential manufacturers subsequently expessed interest in bidding. However, only two price proposals were received, one from the previous supplier and one from another supplier. The Air Force later learned that those two companies were the only licensees for the product. The new supplier's unit price was $31.79, whereas the former supplier's unit price was $72.15. The new supplier's total price was lower by $24,934.

We believe these examples show that substantial savings can be realized through competitive procurement. May we reiterate at this point that our review covered only one segment of defense procurement and a relatively small percent of that segment-only 2,770 aeronautical replacement spare parts.

CONCLUSION AND RECOMMENDATIONS

We believe that the primary reason for the military services continuing to buy the majority of their aeronautical replacement spare parts noncompetitively on open contracts is to be found in the simplicity and expediency of this method of procurement. We also believe, however, that this form of procurement results in higher prices, fosters or subsidizes inefficient and uneconomical practices in industry, and ignores or circumvents a basic policy of the Congress that all qualified suppliers shall have an equal opportunity to compete for the Government's business. Further, we believe that the maximum practical use of competition in the Government procurement program is fundamentally sound and will promote efficiency and economy in both Government and industry.

To effectively overcome the problems we have been discussing this morning, it is our belief that steps must be taken by the Department of Defense and the military departments to reverse the current trend of routinely using negotiated noncompetitive contracting, and to correct the unsatisfactory conditions that exist in the military services in the control over and use of technical data.