I was outside the door, and the door was a little New Orleans type door, slatted, braided door, and I said to the commander, "They want me to agree to make the refrigerators for the Navy." He said, "Well, you might as well say yes at the beginning, because he always gets what he wants. He is a driver." I said, "I will try, but it does not make sense to me for me to make refrigerators, when all of this tremendous productive capacity in these big companies are in existence. He said, "They only sell us their stock items which do not work properly aboard ship." So, we went downstairs to talk to a Captain Uran, and he told us of the predicament he was in in procurement, so I said, "I will take a stab at it," and I said, "I would do it." So, I made refrigerators for them, and supplied everything from the LST's to the LCIL's at not one penny's profit all the way through the war, up to and including the Missouri. After the war I dropped out of that business, because we do not belong in it. Now, where would the Navy have been if someone such as ourselves had not volunteered to do that service? I do not know. I cannot say that there would not have been somebody who cropped up, but I know that we were the ones who did do it. All I can do is talk from the facts and with respect to what happened. I am not talking about people who are dead; they are the men about whom I am talking who are still down there, and they are still alive, and they know me,,all the captains, every last one of them. The president of our Washington agency, Mr. Lyon, can tell you the attitude the Navy took in that connection during the war. He was a commander in the Navy. The CHAIRMAN. I want you to know, Mr. Morrison, that in pursuance of the talk that you had last night with members of the staff, I addressed a letter to Rear Adm. M. L. Ring, Director of Military Supplies of the Munitions Board, Washington, D. C., dated November 21, 1949, as follows-I will read this into the record: MY DEAR ADMIRAL RING: Because of having been genuinely impressed with your apparent determination that one of the important policies folowed in military procurement is to protect the small-business man, as so well expressed by you in your recent appearance before our Monopoly Subcommittee, I urge your personal attention to what appears on the surface to be an abuse of this policy which has been complained of to me. This is a case of the Sunroc Refrigeration Co. and its distributor for Federal sales, which was recently an unsuccessful bidder on Invitation 4 bids No. QM-11-183-50-44, coolers; drinking water (electric) awarded by the Chicago Quartermaster's Purchasing Office to the Westinghouse Electric Corp. I need not specify the details on this matter to you. They are all well known by General Brannon. The file in my possession indicates substantial inconsistencies in the Army's handling of the matter, and raises a serious question as to whether the award to Westinghouse was justifiable in view of Sunroc's claim that it was the lowest responsive bidder. Another interesting complaint is that Sunroc, in an effort to get clarification on certain ambiguities in the specifications, sent 58 separate letters to the Chicago Purchasing Office, to none of which there was a reply, according to the statement given me. Assuming the validity of the complaint, it occurred to me that you should be advised of the seeming indifference exhibited by the lower echelons of the procurement to the broad policies which you are known to support. I should appreciate it if this matter could be looked into, and if you could have your representatives confer with Mr. Bernhardt, my counsel on this committee. Mr. MORRISON. I think that is very ably stated, sir. May I suggest that I am a little confused as to just where Admiral Ring's group comes in, because I received a letter from Mr. Alexander, who is Assistant Secretary for the Army. The CHAIRMAN. Admiral Ring, according to the testimony here, is the one who shapes the policies for all of the procurement agencies. Mr. KEATING. For all purchases? The CHAIRMAN. For military defense. He is chairman of the group-the spokesman when we had him before us. Mr. MORRISON. The letter from Mr. Alexander telling me what he was going to do, and the letter from Col. Alfred B. Dennisdon, has practically the same authorship or, at least, the same thinking back of them, because they read almost identically the same. In most cases what I am apparently doing is asking a subordinate whether he approves of the action of his superior, which I cannot understand; I do not understand how anyone can ever expect a subordinate to condemn the action of his own superior. If that is what we are striving to do through the Munitions Board, I think that will be a futile effort. I do not know. Mr. KEATING. Mr. Morrison, do you get any of your component parts from any of these competitiors? Mr. MORRISON. Oh, yes. We are customers; we have to be. Mr. KEATING. Well, you mean that is the only source for procurement of those component parts? Mr. MORRISON. It is the only source in most instances available to us that make a product which is adaptable to the use that we want to put it; yes. In almost all parts that we buy, there is only one available source. Mr. KEATING. Which of these competitors of yours do you get component parts from? Mr. MORRISON. From General Electric Co., from Nash-Kelvinator Co., Ranco in Columbus. Very often these competitors do not own their own company— in their own name, that is-with whom we deal, such as the Ranco, but there is a stock ownership, which is sufficiently great to exercise management control. Mr. KEATING. But you do get component parts directly from the General Electric Co. ? Mr. MORRISON. Oh, yes. I know Mr. Wilson very well. Mr. KEATING. And have you had difficulty in getting those at all? Mr. MORRISON. No. They have never held us up at all. We have never had a problem. Very often I have had problems, very serious problems, in having them create a better product for me, and I had an interesting example that you might be interested in. Our engineers figured a way to make a better motor. We do not have the facilities, at least we did not want to invest in facilities, to make a better motor, or any motor, so I carried the designs of the motor back and forth to Fort Wayne, and to New York again and again to convince the General Electric Co. that they should produce this superior type of motor, principally for the use of the Government; I had this in mind for post-office use and other Government use. Finally, after a long, long time, they agreed to do it, but at a rather substantial increase in cost. Mr. COYLE. Why did you not go to one of the small motor companies? Mr. MORRISON. The small motor manufacturer would simply not have, in my opinion, the ability to stay in business. I will tell you what I mean by that: This is purely hearsay, and I say this as such, I do not know this to be a fact-but it is our understanding that the motor business is controlled by a very few people, and that in times of short supply, some new elements enter, such as Jack & Heintz and others. Immediately after the short-supply period the price of motors is depressed to a point which freezes out all of the independent producers until such a point where the price is again elevated. I could not, in fairness to our company, altruistic as I want to be, put ourselves into a position of dealing with a motor manufacturer, such as Jack & Heintz, with whom I have friendly relations, and whom I know, for fear that their existence would not be a continuing one. Mr. COYLE. What do you mean, Mr. Morrison, by "prices are depressed"? Mr. MORRISON. I mean lower. Mr. COYLE. You mean selling lower than the cost price? Mr. MORRISON. I would think the price on motors was depressed under Jack & Heintz' price roughly 15 percent, and I think after that they completely went out of business. Mr. COYLE. Would that mean that Jack & Heintz were not able to make motors as cheaply as General Motors? Mr. MORRISON. I would not think so. I would think, knowing Jack & Heintz as I do, that they could make it cheaper, but they could not keep it up as a sustained diet. The CHAIRMAN. If they go out of business, if they have gone out of business, I do not know which, then the price would be jacked up? Mr. MORRISON. Yes; that answers the first part of your question. Let me tell you about the motors. Mr. KEATING. To your own way of thinking-it is interesting to know-you thought that there was an advantage in going to a larger manufacturer for your components in this case? The CHAIRMAN. Only for the reason that you have indicated. Mr. KEATING. And for that reason, if it exists, it would violate existing antitrust laws, would it not? Mr. MORRISON. There I am not qualified to comment. Mr. KEATING. I see. Mr. MORRISON. I am sorry, but I would not know; I am not familiar with the statutes. The CHAIRMAN. Go on with the second phase of your answer. Mr. MORRISON. So that I would not be guilty of upsetting the situation, I had to choose between a number of elements, and I did choose that one. The CHAIRMAN. Continue on to the second segment of the problem. Mr. MORRISON. I finally convinced the General Electric Co. to make the motor, and they produced it, and they charged me substantially. During that year our cooler was testing against the General Electric cooler, and it vastly out-performed their cooler, using something like The half the electrical power to produce the same amount of water. scientists were somewhat alarmed and wanted to study it element by element, and in checking the motor, they found that the General Electric motor that we had been supplied with was infinitely superior to the General Electric motor supplied by the General Electric Co. in its cooler, and so they raised a question about it, and the General Electric Co. explained to them-of course, this is only what I picked up, because I do not have the files-that that was something that we insisted upon. Mr. COYLE. You mean they did not put it in their own? Mr. MORRISON. Oh, no. Mr. BRYSON. It was too good for them? Mr. MORRISON. They did not use it. The minute the emergency came up, the minute there was any excuse to stop making it, they stopped making that motor for me. The CHAIRMAN. Why did they do that? Mr. MORRISON. Well, here is the thinking on it: They will say, now, "Mr. Celler wants a water cooler for his law office in New York. What does he care whether it runs three-quarters of the time, all the time, or only a tenth of the time?" The CHAIRMAN. That is true, I do not care; I do not watch it. Mr. MORRISON. You would not pay any attention to that sort of thing. If they were trying to sell that to the Standard Oil Co. of New Jersey, they would have to send it over to Bay Water, or to one of the big laboratories at Western Electric to check, and then they would not get the business. They do not get that kind of business. They only get the business of the unsophisticated purchaser. The CHAIRMAN. Like Celler. [Laughter.] Mr. MORRISON. In that field, you cannot call yourself unsophisticated when you write a letter like that last one. [Laughter.] Mr. COYLE. Then the ordinary consumer is not getting the best prod uct because he has no way of finding out just what it is. Mr. MORRISON. I think that is an absolutely fair statement to make. Mr. KEATING. And of these people with testing facilities, you say you get what percentage? Mr. MORRISON. Seventy-seven percent of the large national users who buy year after year. Mr. BRYSON. By laboratory tests? Mr. MORRISON. People who know. For instance, the big railroad, now, we could not sell that to the Budd Co. Our salesmen's statements count for nothing there. They have heard all of that before. All they want is what potentiometer tests show after it has been subjected to the tests. And so long as the Bureau of Standards conducts the tests for the United States Government, I will never issue a complaint; I will never issue a complaint, or if any other competent laboratory does so. But so long as it is going to be done on the sales talk as to whether my man can tell a better story and use "jumbo," "colossal," "terrific," that sort of phraseology as against another, who is using other adjectives, we might be Mr. BRYSON. Just what is your experience with the Government? Mr. MORRISON. Excellent. I think the General Services Administration, at their top level, what Mr. Larson is trying to do, and the conduct of Mr. Mack in trying to run General Services Administration, is something that every small-business man should know about, and does not know about it; because if at random the small-business man in the United States should be asked to come to Washington to get business, he would say that he would be getting a run-around. The CHAIRMAN. Mr. Morrison, I think we have occupied a great deal of your attention. You have been a very illuminating witness, and have given us some very surprising facts. You are going to supply us with some additional information about this procurement situation? Mr. MORRISON. Yes, sir. The CHAIRMAN. I have just one more question: Is your product still rated best by the Bureau of Standards? Mr. MORRISON. Well, that is an unfortunate thing. There is not an approval by the United States Public Health Service or the Bureau of Standards or Underwriters' Laboratories. There is no such thing as approval. The CHAIRMAN. I see. Mr. MORRISON. The thing the Bureau of Standards does, they answer questions for Federal departments. They answer questions as to, does this equipment do so and so or not? Now, the use of the word "approved" is not a correct one, and I would not say it is approved. That is not approved, but Mr. KEATING. None of your competitors are approved either in the same way? Mr. MORRISON. No; but I would be willing to say that on the basis of any testing conducted by the type of personnel that are presently in the Bureau of Standards, I would say Mr. COYLE. Do your competitors say that they are approved by anybody? Mr. MORRISON. I can show you that sort of thing. In answer to your question, on September 15, 1949, our director of development, J. G. Wehrwein, wrote a letter to Underwriters' Laboratories, Inc., 207 East Ohio Street, Chicago, Ill., as follows: GENTLEMEN: A number of water cooler manufacturers use the expression, "Approved by the Underwriters' Laboratories, Inc.," on their specification sheets. We understand there is no such thing as "Approved by the Underwriters' Laboratories, Inc." and that the correct expression is "Listed by Underwriters' Laboratories, Inc." Frequently, specification writers, especially for municipal and State government laboratories, pick up the expression first mentioned above, and ask us for a categorical explanation, if we are "approved," et cetera. In these and other cases, it is necessary for us to say "No" and explain about the listing and being listed. On a number of occasions would greatly appreciate hearing from you on this subject, and having your suggestions for possible remedies for this situation. Enclosed is a typical sheet. Sincerely, SUNROC REFRIGERATION CO. Mr. KEATING. What does the sheet state that you enclosed? |