Mr. BURNS. I have a letter that is not any statement of fine, but it is just a letter. I think you might be interested in knowing about it.

Your counsel has a copy of that letter, from Mr. Bevan to us. I don't have to look through my files. He knows where it is.

Mr. BROOKS. To what effect?

Mr. BURNS. It is right there.

Mr. BROOKS. The letter apparently that you refer to is to the Hercules Construction, dated June 25, 1959, in effect on their partitions, and said:

We have been advised that the steel work on this subject product is not galvanized.

It is requested that you furnish us with the credit proposal for not using the galvanized steel.

Sincerely yours,

ROBERT BEVAN (For the Government).

Mr. BURNS. That's right. So I don't know about any fine or anything. That is all that I know about it.

Mr. BROOKS. That is all you know about it?

Mr. BURNS. Yes. I made no statement.

Mr. BROOKS. To clarify this fact I think we have a rundown on what did happen after that. Would you give us a statement on that, Mr. Moore, as to what happened?

Mr. MOORE. Yes, sir.

This letter was sent to the Hercules Construction Co. asking the reason, if a credit should be allowed on the job. The Hercules then contacted the Hamilton Co. and I believe the Hamilton Co. contacted Mr. O'Brien, who was the manufacturer. They prepared an analysis of the materials that were used to show that the materials used, instead of the galvanized steel, was superior and more expensive than the galvanized process, and, therefore, GSA did not require or ask for a credit to be allowed, and there was no fine involved as far as GSA actions are concerned.

Mr. BURNS. Mr. Chairman, I was very much surprised to even get the letter. I mean it wasn't any of my business. It may have been missent to me. I don't know.

Mr. BROOKS. It is kind of unusual that they would have sent you a copy.

Mr. BURNS. Yes. I didn't receive anything else. I didn't have the contract. That was the only other thing I knew about the St. Louis affair.

Mr. BROOKS. We certainly do appreciate your coming down and staying through this hearing. We appreciate your cooperation and trust that these problems will be speedily taken care of.

We thank you.

Mr. BURNS. Thank you, Mr. Chairman.

Thank you, Mr. Wallhauser.

Mr. BROOKS. We have one further statement that I want. We would be delighted to hear from your principals who were involved in the discussion with the contractor there in St. Louis. We would be pleased to hear whatever they care to state about it in writing to us.

At this time I want to point out that we have had some discussion of Mr. Ray and Mr. Rice and their activities with the Third Recon. Their lawyer has been here and he has been more than willing to give

us some additional facts, and has agreed to present a statement in writing-I don't know if he has it ready today, but to present it— which will point out, as I understand it, that they have spent not $200,000, but in the neighborhood of $400,000 on improvements in this property that they have leased to the Government. Of necessity they had to spend this $400,000 to meet the specifications. And they have spent, I believe, an additional $50,000 for parking facilities which enhance the value but also is an expense.

These are the main expenses that have been incurred.

He also pointed out to me, and will point out in his statement for the committee and for the full consideration of the committee, that the details about the corporation were unintentional. I think he was off practicing law someplace else, trying to make some more money, and had some difficulty about the name, whether they were going to call it the Third Recon or the Happy Holiday, or the Builders, Inc., or whatever the name was going to be, and it was a technicality which prevented that corporation from having been duly and legally organized in time for this bid opening.

I think that in fairness to him we should point those things out. We will appreciate your submission of a statement and hope that in the future your corporations are organized more promptly, because the failure to organize a corporation in this instance meant that the GSA was dealing with a legally and technically unqualified bidder, and it has been considerably embarrassing to them, and it is to the Government, and it certainly could be, as a matter of policy, most embarrassing to accept an unqualified bid and throw out 10 qualified bidders, because they have their complaint. Think of what their lawyers would say.

VOICE. Except one thing, Mr. Chairman: My corporation papers were in Jefferson City, and we, as a de facto corporation, were liable to the Government and to everybody we obligated ourselves, for some $400,000.

Mr. BROOKS. Your full name is what?

Mr. WALDMAN. David Waldman.

Mr. BROOKS. David Waldman of Kansas City, attorney for the Third Recon people. You will submit a statement for me? Mr. WALDMAN. I will submit a statement.

Mr. BROOKS. From the testimony we have heard during this hearing it seems apparent that many of the reports the subcommittee had of maladministration in the GSA region 6 have been well founded.

It is difficult for me to believe that irregularities, some of them technical, such as we have examined, would occur on any such scale in a really closely knit organization.

I think that Commissioner Jay is a very personable, assured, and apparently sincere man. We appreciate the answers that he has given to our questions. He certainly had ready answers, but his explanation and promises to make his employees hew to the line do not obliterate the facts of some careless administration in the past which we have examined in this hearing.

A general has responsibility for actions of his troops and he sets an example for them. It is a small wonder to me that we haven't discovered more instances of irregular practices when he seems to have some serious concern about his personal moneymaking activities,

when I think that he has his hands full with $50 million budgets, and with 1,600 people. He naturally has a lot of responsibility. I would think that it would keep him pretty well occupied.

I would like to comment briefly on a couple of things that struck me as particularly significant in this hearing, though none of these are final conclusions because the full committee hasn't gone over the transcript.

Mr. Ray and Mr. Rice are obviously competent businessmen, and I think that they landed a very lucrative Federal lease contract, though at the time they landed it they were not fully qualified as bidders.

I think that surely there is room for improvement in the watchfulness of the GSA people here in preventing unqualified bidders from receiving awards, or waiting until they are qualified before making the awards.

Surely the GSA should know who the bidders are when they are accepting bids. It is not the GSA's task to aid people in making money. It is their task to provide housing for Federal offices at a reasonable rate.

The matter of the Commodity Stabilization building was, I think, a regrettable thing which could probably well have been eliminated altogether, if either the Commodity Stabilization had gotten clear authority to do it or, when they did it, they had applied to the GSA and gone through the regular channels. I don't think there would have been any problem of showing the need for setting up those data machines. I think that the Commodity Stabilization would have found GSA perfectly willing to expedite the installation of those five or six thousand dollars' worth of partitions.

I think that Mr. Jay provided a calm and understanding explanation of Mr. Warren's intemperance and disposition, but regardless of that statement it does seem interesting that Mr. Warren has been a veteran career employee with many years of service who has apparently gotten along pretty well all these years. He felt he was badly abused and that efforts were being made to railroad him out of here.

If things are as well ordered as Mr. Jay says they are, it seems it would follow then that we should have fewer personnel problems than we have had in the past.

I think that it is very essential, and I think important, that the Administrator know exactly what his commissioners are doing. I am hopeful that—rather, I feel that Mr. Floete would certainly want the administrator of this area, the regional commissioner, to spend his full time at operating this important segment of our Government, because we have seven States involved, and I think that it is something to consider. I am hopeful that after this hearing some remedial action can be worked out in this area. I am hopeful that Mr. Jay can get it concluded.

I think that there should be a much stricter enforcement of the rules for running the Government's business. I understand that he intends to exercise a stricter enforcement of the Government's business here in this Kansas City office.

We are going to return to Washington and will seriously assess the testimony and the other records before we reach any final conclusion, before a report is prepared for Mr. Floete, for the GAO, or for anybody else. But you can rest assured that we will do our best to en

courage appropriate corrective action and bring the matters, if necessary, before the Congress.

I would like to say that it may be that my colleague, Mr. Wallhauser, will want to add something to this. This is a sort of off-thecuff statement and does not reflect a careful study of the transcript, of course, which will be made in Washington before any final decision is made.

Mr. WALLHAUSER. Thank you, Mr. Chairman.

I would like to say that the chairman has made a statement which is his perfect right, and I am certain that he is a very dedicated individual.

I would like, however, to reserve the right to examine the transcript of testimony very carefully, as we will prior to our executive meeting. I am not bound by any of his suggestions until after I have carefully considered all of the testimony.

I do appreciate the readiness of the witnesses to cooperate. I do appreciate the courtesy of the citizens of this community who have so graciously given us their facilities, and I join with the chairman that we are in agreement that the duty of this subcommittee and our full committee is to see that the agencies of the Government are properly run for the benefit of all the taxpayers.

I just want to reserve, Mr. Chairman, without attempting to disagree or agree with you, the right to further consider the various matters before us.

Thank you very much.

Mr. BROOKS. We have always had a good feeling on the committee. It is a genuine pleasure to travel with men of his quality and integrity.

Thank you all for being here. I hope we have not put you to too much trouble.

(Whereupon, at 1:34 p.m., the subcommittee hearing in the above matter was adjourned.)

APPENDIX

Fart I--Documents relating to hert Building Project, St. Louis, M.

Exhibit 1--Section 11, movable partitions, from specifications for
Mart Luilding Project No. DEC 3200,, March 20, 15)

11-1. Extent. The work under this section of the specification includes the following:

all as shown on Drawings 27-3 and 27-4 and as hereinafter specified.

11-2. All work of fabrication and erection shall be according to standard details as prescribed by the manufacturer, and shall be done by a subcontractor approved by the manufacturer.

11-3. General. Movable partitions covered by this section shall be of the flush-panel type - no framing or trim shall protrude more than 1/8" from the finished panel surfaces, except base trim, which shall not protrude more than 1/2". Finished partitions shall not exceed 1-3/4" thickness except at base where thickness will be 2-3/4".

11-4. Partitions shall be designed and constructed to permit the installation of electrical circuits continuously through the partition base and vertically by the use of wiring posts, supplied by partition manufacturer.

11-5. Metal Parts. All metal parts shall be of minimum 20-gauge electrolytic zinc-coated steel. Studs and framing members shall be one-piece continuous roll-formed sections of minimum 18-gauge electrolytic zinc-coated steel. All exposed surfaces of steel parts shall be finished ready for painting without need for further priming.

11-6. Steel Door Frames shall be designed to receive doors of the dimension and thickness indicated on the drawings, and shall be punched, slotted, mortised, etc. ready to receive door and manufacturer's standard hardware. Frames for 1-3/8" thick doors shall be rolled-section minimum 16-gauge electrolytic zinc-coated steel, and shall be flush with the partition trim and shall not extend beyond trim.

11-7. Corner Post shall be of one-piece roll-formed section of minimum 18-gauge electrolytic zinc-coated steel.

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