4. the problem of finding and developing competitive contractors under previous contracts which could be used for competitive procurement; 5. although the Navy files contain complete and current technical data in a large percentage of the cases 6. 7. examined, there is still need for improvement in technical data; the form of contract (referred to by the GAO as an opportunity to compete for the Government's the Navy is misusing authority to negotiate. The draft report also discusses some of the details of the noncompetitive procurement of these three specific parts: (In addition to referring to specific parts discussed II. described in the Comptroller General's Statement reference to Item numbers. Unless otherwise stated, all such Item references are to Schedule obviate the need to clarify slight differences in nomenclature). (a) retaining nut, D. R., p. 12, the same as Item 43; of said Statement. The first two of these procurements are cited as illustrations of the general proposition summarized in 3. above; and the In this connection, the draft report suggests that sole - contractor sources of supply. Hearings Before Subcommittee for Special Investigations, House Armed Services Committee. A formal statement was submitted in the above hearings by Joseph Campbell, Comptroller General of the United States. This statement and the testimony of other GAO witnesses were tendered to support directly or indirectly the findings in the GAO draft report summarized above. In addition, implications were drawn from the testimony advanced, that the Navy had frequently been the victim of profiteering when it procured aeronautical replacement parts from a sole source. The Navy's defense based upon overall annual pricing procedures and the standard cost system of accounting and the effect thereon of net plus or minus variances, as applied in the principal Navy contracts involved, was the subject of exhaustive questioning by the Subcommittee in an endeavor to evaluate the operation of the standard cost system or the method of pricing. The Subcommittee seriously questioned the Navy position that the rocker-box cover gasket (Item 35) had to be bought solesource from Pratt and Whitney. It was stated that the Navy testimony regarding the quality assurance testing performed by Pratt and Whitney was inaccurate, was probably based on hearsay, or assumptions rather than verified facts, and resulted in the Navy paying for services which it did not in fact receive. It was stated that the character of this testimony was such that it threw a cloud on the Navy statement that some sixteen additional parts of the twenty-six Navy parts referred to in the Comptroller General's Statement had to be purchased sole source. The Committee strongly suggested that all of these items be critically reexamined. Secretary BeLieu assured the Committee that this would be done. The Subcommittee further questioned the Navy's solesource determination on the two bearings purchased from AiResearch Manufacturing Company, Arizona Division (The Garrett Corp.) under Items 24 and 26. The Navy conceded that, on the basis of information recently obtained, both of these items could and would now be purchased directly from AiResearch's subcontractor, New Departure (Division of General Motors Corp.). Discussion was also had in the testimony on these additional items: 28 (clamp), 33 (rivet), 36 (fuel combust lock), 37 (machine bolt), 38 (cotter pin), 40 (seal segment assembly), 43 (retaining nut), 44 (bolt), and 47 (clamp). Additional questions raised during the hearings included the following: 1. The Navy's method of pricing and payment resulted in 70893 0-61-pt. 1- -38 2. financing Pratt and Whitney, the principal Navy contractor now engaged in this method of pricing, with interest-free Government money until appropriate refund was made. The Navy may have allowed or was considering the allowance of costs to finance a "strike" in connection with the final annual pricing of Pratt and Whitney contracts performed during calendar year 1960. B. 3. The Committee inquired whether effective action would be taken where deficiencies were found to be the fault of the personnel involved. Assurances were given that action would be taken as appropriate. The need for additional qualified personnel was also discussed. PREVIOUS GAO REPORT - SAME SUBJECT The GAO made a prior review of Navy policies and procedures in regard to the subject matter of the findings contained in the current draft report. The prior review resulted in a draft report forwarded on October 6, 1959 and a final report forwarded on January 29, 1960. The findings in these two reports with regard to the Navy dealt with the same subjects as the current report. The exact period of operations reviewed by the GAO is not disclosed in either the earlier or the current report. The dates of transactions referred to in the earlier reports, however, indicate that the approximate |