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Excerpt from letter, dated June 18, 1957, of General Motors Corp.,
to Comptroller General stating their position....

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Dated April 26, 1957, from the Comptroller General to Harlow H.
Curtice....

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Dated June 3, 1957, from Joseph Campbell, Comptroller General,
to Harlow H. Curtice_

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Dated July 19, 1957, from Congressman Hébert to Joseph
Campbell...

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Dated August 2, 1957, from Dudley C. Sharp, Assistant Secre-
tary of the Air Force, to the Comptroller General.
Dated August 21, 1957, from A. F. Power to John J. Courtney-
Dated August 21, 1957, from Joseph Campbell, Comptroller
General of the United States, to Congressman Hébert__

Dated August 23, 1957, from John J. Courtney to A. F. Power.

Dated August 27, 1957, from John J. Courtney to A. F. Power..

Dated September 10, 1957, from A. F. Power to John J. Courtney

Dated October 14, 1957, from Comptroller General of the United

States to Congressman Hébert_--

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Letters, exhibits, etc.-Continued

Page

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Loofbourrow, B. D., deputy chief, Pricing Staff Division, Air Materiel
Command, Memorandum for the File, dated January 3, 1957.
Purchase Order Revision (document) on order No. KDS 9328. 2918, 2796

Powers, Lawrence J., Director of Defense, Auditing and Accounting

Division, General Accounting Office:

Action taken by the Air Force, more effective pricing negotiations. 2566

Administrative audits___

Known reductions in subcontractor's prices__

Refund requested from the contractor_--

Thompson, Lt. Col. George W., United States Air Force, Chief,
Pricing Staff Division, Deputy Director, Procurement, Air Materiel
Command, memorandum dated August 13, 1957--

Vinson, Hon. Carl, Chairman, Committee on Armed Services:
Letter to, dated July 19, 1957, from Joseph Campbell..
Letter from, dated July 19, 1957, to Joseph Campbell..

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STUDY OF AIR FORCE CONTRACT AF 33 (038)-18503 GENERAL MOTORS CORP., BUICK-OLDSMOBILE-PONTIAC ASSEMBLY DIVISION

MONDAY, JULY 22, 1957

HOUSE OF REPRESENTATIVES,
COMMITTEE ON ARMED SERVICES,

SUBCOMMITTEE FOR SPECIAL INVESTIGATIONS,

Washington, D. C.

The subcommittee met at 10 a. m., Hon. F. Edward Hébert (chairman of the subcommittee) presiding, with the following members present: Mr. Hess, Mr. Gavin, Mr. Rivers, Mr. Cunningham, Mr. Bates, Mr. Hardy, Mr. Osmers, and Mr. Miller.

Mr. HÉBERT. The committee will be in order.

Members of the committee, before proceeding this morning the Chair wishes to make a statement in connection with our meeting of last Saturday morning, and the subsequent developments.

Because of the development of events which the committee is familiar with, Mr. Hurley's not being prepared at the time, or not desiring to comment on the matter that was put in the record at the direction of the committee, it was thought advisable that as far as the aircraft engine hearing is concerned it be suspended until next Monday, when we will pick up again, and then await the pleasure of Mr. Hurley before we called the Air Force witnesses in connection with the matter discussed.

In the meantime, the subject matter of today's hearing was set at the direction of the chairman of the full committee, and, with the approval of the members of the subcommittee, I desire to make this statement:

This hearing will be a review with representatives of the General Accounting Office, headed by Lawrence J. Powers, the Director of the Division of Defense Accounting and Auditing, to discuss with us the findings made by the General Accounting Office on Air Force contract No. 33(038)-18503, dated April 25, 1952, for the production of 599 F-84 airplanes for the United States Government.

We have been directed by the chairman of the full committee to take this matter up immediately. It is of far reaching importance and bears close examination because of the subcommittee's recent report on negotiated contracts and because of the pendency of H. R. 8711, which would amend the Armed Services Procurement Act to correct many abuses in negotiated procedure.

The matters which wil be raised this morning, as we understand from a short briefing, may well require immediate legislation, and, of

course, that would require prompt action on the part of the subcommittee.

I shall not detail the matter further excepting to say that this was a contract performed by General Motors Corp., Buick-OldsmobilePontiac assembly division, located at Kansas City, Kans.

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Now, Mr. Courtney, do you have your witnesses?

Mr. COURTNEY. Mr. Chairman, we have as witnesses this morning Mr. Lawrence J. Powers, who is Director of the Defense Auditing and Accounting Division of the General Accounting Office, sitting in the center of the group. On his right, Mr. W. A. Newman, Deputy Director. And to the extreme right, Mr. Stephen Haycock. Mr. Power's left-Mr. James Hammond and Mr. David Lambert, of the General Accounting Office. Mr. Lambert, as you know, is legislative and liaison representative with the Congress, from the General Accounting Office.

Mr. Chairman, as a part of the record, and without reading it, I should like to offer and have included the letter of transmittal from the Comptroller General of the United States to the chairman of the committee relating to this subject matter.

(The letter is as follows:)

Hon. CARL VINSON,

Chairman, Committee on Armed Services,

House of Representatives.

JULY 19, 1957.

DEAR MR. CHAIRMAN: Herewith for the use of your committee is a copy of our report on review of Department of the Air Force contract AF 33 (038)–18503 with General Motors Corp., Buick-Oldsmobile-Pontiac assembly division, Kansas City, Kans., for the manufacture of 599 F-84F airplanes. Our examination was made pursuant to provisions of the Budget and Accounting Act, 1921 (31 U. S. C. 53), the Accounting and Auditing Act of 1950 (31 U. S. C. 65), and the Armed Services Procurement Act of 1947, as amended by the act of October 31, 1951 (41 U. S. C. 153 (c)).

This report shows that the contractor realized a profit of $17,459,200 in excess of that contemplated in price-redetermination negotiations and that this additional profit resulted in part from inadequate analysis and evaluation by the Air Force of the contractor's pricing proposals. Our examination disclosed that the contractor's proposals included overestimates totaling $8,322,000 which were not considered in negotiations. Recognition of these overestimates by the Air Force should have resulted in substantial savings to the Government. After completion of contract performance, the Air Force requested, on at least three occasions, General Motors Corp. to consider making a voluntary refund on this contract, but the contractor declined to make any refund or otherwise adjust the contract prices.

Based on the information available to us, including comments dated June 18, 1957, from General Motors Corp., there is serious question as to the legal validity of the negotiated prices. In order to resolve this matter, additional information was requested from the Secretary of the Air Force on July 8, 1957. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

Mr. COURTNEY. And the answer of the chairman of the full committee, and of the chairman of the subcommittee, to the letter of transmittal.

(The letters are as follows:)

Hon. JOSEPH CAMPBELL,

Comptroller General of the United States,

Washington, D. C.

JULY 19, 1957.

DEAR MR. COMPTROLLER GENERAL: I have just read your letter of July 19, 1957, No. B-125054, with which you transmitted a report and review made by the

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