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counting Office and asked for comment, which they made, and which is part of the record.
Following the public hearings and the public statement by General Accounting Office, the staff-in this instance, again, headed by Mr. Kuhn and assisted by Mr. Tyler-proceeded to take the minutes of the Air Force negotiators and arrive at what they considered the proper price for the plane, per unit.
They used two different methods of computing these figures. They will explain to you in detail.
By the first method, they carried at the worst price the Government should get, or the highest price—they arrived at $257,644 per unit, in the contract.
By a second computation and by what they considered the best price that the Government could obtain, it was $254,073 per unit.
In each instance, using the same figures that the Air Force had available to them, even our own staff was able to come up with a figure better than $262,000, which the Air Force opened the negotiations
Now, in the ultimate, the $275,298 per unit was paid to General Motors.
It is interesting to note—and this is an important thing—that up to this period the Air Force was dealing on an assumption based on its experience. General Motors was dealing with figures assumed to be accurate. General Motors alone was in possession of the true figures at all times of the contract. Only General Motors knew the actual figures, until the General Accounting Office conducted its postaudit.
The actual audit by the General Accounting Office showed an actual cost per plane of $231,521.
This was the actual cost as audited.
And I direct the attention of the committee in this comparison to the alleged accurate figures of General Motors of $288,000 per unit. That is the actual cost.
Keep in mind that the $288,000 does not reflect the 8 percent allowable profit, as I understand it. However, even if it did, adding the 8 percent profit would show an actual cost of $250,042 per unit.
You compare the $250,000 per unit to the estimate of the Air Force and the estimate of the committee staff and you will see how close the committee staff came to the actual audited figures, as compared to what General Motors offered as accurate figures.
That is the case as simply as it can be stated, in generalities. The staff will develop the details.
I think that about places right on the table the situation as we know it.
The staff will present its case and the chairman will ask the cooperation of the members of the committee not to interrupt the staff with questions until after the staff has had an opportunity to present the story as it found it by its examination, and then the chairman will recognize each and every member of the committee for any questions he desires to ask.
Mr. COURTNEY. Mr. Chairman, to complete, that is to make a complete record and a presentation of the subject matter, I would first direct the subcommittee's attention to the provisions of the contract with which we are dealing, Air Force contract No. 33 (038)-18503.
Page 13, under clause 2, is a provision for the submission of data accumulated by the contractor for use at point of redetermination. In pertinent part it reads:
At the time of each of the times specified or provided for in paragraph 8 of this clauseand parenthetically those are the occasions on which redetermination negotiations are to occurthe contractor shall submit, one, a new estimate and breakdown of the unit cost and the proposed prices of the items remaining under this contract after the effective date of the price revision, itemized so far as practicable in the manner prescribed by War Department Standard Form 105.
That is the itemization method which has been employed by the staff and was employed by the contractor in this instance.
Two, an explanation of the differences between the original or last preceding estimate and the new estimate.
Three, such relevant shop and enginering data, cost records, overhead absorption reports, and accounting statements as may be of assistance in determining the accuracy and reliability of the new estimate. Four, a statement of experienced costs of production hereunder, to the extent they are available at the time or times of the negotiation of the revision of prices hereunder.
Again, a similar provision directs the furnishing of costs and availability-makes available from the contractor to Government auditors the records on cost information. Without repeating it, it is clause 45 on page 18 of the contract.
Now, Mr. Chairman, first we should like to introduce the contract, having particular reference to the paragraphs and the requirements imposed upon the contractor.
Mr. HÉBERT. Without objection.
$2, 376, 267. 14
Allotment breakdown PR No. 244813:
Item la. 57X3100 163-5000 P131-09 S33-600.--. PR No. 85952:
Items la, 1b and 4. 57X3100 163–5000 P-2112(1)-09
Item 2a, 57X3100 163-5000 P121-08 S33-600_ PR No. 125285 :
Items 1c, 2b and 4, 97-110/21045.000 263–7000 P-931-09
158, 984, 539. 45 13, 513, 262. 61
74, 142, 500.00
57X3100 163-5000 P131-09 S33-600_
$2, 376, 267. 14 158, 984, 539. 45 13, 513, 262. 61 74, 112, 500.00
PART I, STATEMENT OF WORK
(a) The Contractor shall furnish to the Government the articles and supplies in the quantities and at the unit and total prices set forth below, which prices are subject to the Clause of the General Provisions entitled “Revision of Prices":
a: 71 F-84F aircraft in accordance with Republic Aviation
Corporation Model Specification MS-23M, Revision
$106, 560, 350. 00
tion Corporation Model Specification MS-23M, Revi-
$52, 568, 880.00 c. 250 F-84F aircraft in accordance with Republic Avia
tion Corporation Model Specification MS-23M, Revi-
58, 742, 500.00 Item 2: a. Spare parts for Items 1a and lb above, in accordance
with "Spare Parts Provisioning Document for
paragraph (b) below at a total estimated price of --- 13, 513, 262. 61 b. Spare parts for Item 1c above, in accordance with “Spare
Parts Provisioning Document for USAF and Navy
14, 702, 325. 00 Item 3. Engineering Data for Items la, 1b, and 1c, in accordance with Exhibit
“1” attached hereto, price of which is included in prices of Items la, 1b,
and 1c. Item 4. Engineering Changes : a. Such engineering and/or specification changes in the total estimated
amount set forth herein below, for the airplanes called for under Item 1 above, as may be authorized from time to time under the provision of this contract or amendments hereto which specifically reference this Item. Such amounts may be increased or decreased from time to time
by the Government solely at its discretion. b. If at any time the Contractor has reason to believe that the price for any
change authorized under the provisions of this contract and which is chargeable to this Item, when added to the total price for all other unformalized changes chargeable hereto, will exceed the total amount available hereunder for such changes it will so notify the Contracting Officer in writing setting forth the sum which in the opinion of the
contractor the amount available will be exceeded. c. Nothing herein contained shall be construed : (1) As relieving the Contractor from the obligation to proceed as
directed by any Contract Change Notification issued in accord
ance with the provisions of this contract; (2) As limiting or enlarging upon the provisions of the Clause hereof
entitled “Changes", or limiting the Contractor's right to an equitable adjustment in the contract price as provided in said Clause entitled “Changes", irrespective of the availability
of funds under this Item. (3) As permitting the Contractor to proceed with any engineering
or specification changes, unless directed in accordance with the provisions of the Clause hereof entitled "Changes", or in
any amendment to this contract. (4) As increasing the contract price by the amount allotted for this
Item (set forth in paragraph d. immediately below) for the purpose of computing the amount of partial payments that may be made under any partial payments clause incorporated
in this contract. d. The total amount for this item is.
$2,929, 251. 01 Items 1 (a) and 1 (b): 57X3100 163–5000 P112 (1)-09 S33-600
Item 1 (c): 97–110/21045.000 263–7000 P931-09 S33-600 (b) Spare Parts Provisioning Document shall be modified as follows: (1) By amending paragraph 1, Part II, to read as follows:
“Representatives of the Contractor will participate in the preprovisioning meeting with Republic and the Department.”
(2) By amending paragraph 2, Part II, to read as follows:
“At the preprovisioning meeting, the Department shall establish from the data submitted by Republic Aviation Corporation, a 100 percent production list of major assemblies and components, which major assemblies and components Contractor shall be required to furnish. Within fifteen (15) days after the delivery of such list to the Contractor by the Department, the Department shall furnish to the Contractor a written order, signed by the Department's authorized representative, covering the items and quantities set forth on such list, which shall obligate the Department for the procurement from the Contractor of the items and quantities so selected. Upon receipt of such order, the Contractor shall be obligated to furnish the items and quantities of spare parts listed thereon under the provisions of the contract relating to spare parts, and the Contractor shall proceed as necessary to fabricate or procure the items selected, provided that such order may be revised or superseded as hereinafter provided in this document.
“The Contractor shall maintain a production list by revisions until the provisioning meeting is held and the provisioning parts breakdown is established.”
(3) By inserting the words “for parts peculiar to GM Production” immediately after the words “production lists for vendor items" appearing in the first line of paragraph 3 (b) (1), Part II.
(4) By inserting the words "if and as directed by the Department" immediately after the words "spare parts list” in line 1 of paragraph 3 (b) (2), Part II.
(5) By inserting the words “which either the Contractor or Republic Aviation Corporation are required to furnish and” immediately after the word “lists” in line 2 of paragraph 3 (b) (3), Part II.
(6) By deleting Sections (a), (b), (c) and (d), paragraph (1), Part III, and inserting the following:
“Republic Aviation Corporation shall be responsible for the preparation and submittal of all preprovisioning technical data except as provided by Part II, paragraph 3 (b) (1) and shall prepare and maintain in an up-to-date status throughout the life of the contract provisioning parts breakdown for use by the Contractor and Headquarters AMC. The Provisioning parts breakdown shall be completed and received by the Contractor twenty-one (21) days prior to the time the provisioning meeting convenes which shall be six (6) months prior to delivery of the first F-84F aircraft under this contract; and the provisioning parts breakdown at that time, shall be representative on the detailed design releases for the model F-84F aircraft.”
(7) By inserting the words "which can be furnished and delivered prior to the scheduled delivery of the last F-84F type aircraft to be delivered under its Air Force contracts” after the words “Spare parts” in the 4th line of paragraph 2 (a) of Part V.
(8) Part V, paragraph 4, is amended by adding after the words “planned support program” in line 4 and “under the contract” in line 11 the following words: "provided, however, that such spare parts can be furnished prior to the scheduled delivery of the last F-84F type aircraft to be delivered under its Air Force contracts."
(9) By adding the words "provided, however, that such spare parts can be furnished prior to the scheduled delivery of the last F-84F type aircraft to be delivered under its Air Force contracts." after the words "such additional spare parts” in line 5 of paragraph 5, Part V.
(10) By amending paragraph (1) of Part VIII to read as follows: “1. Preservation, packaging, packing and marking shall be in accordance with AMC Form 163 provided, however, that Republic Aviation Corporation shall furnish duplicates of their presently established detailed packaging requirements process cards to the Contractor to cover common detailed packaging requirements for spares and shall also furnish general procedure and administrative details of the packaging program.”
(c) Quality Control System.—The Contractor's Quality Control System shall conform to the provisioning of Mil-Q-5923A dated September 14, 1951, unless otherwise specified herein.
(d) Specification.--The Government specifications listed herein or in any document incorporated herein are incorporated by reference and shall apply to this contract and shall be deemed to include all specifications supplementary to or superseding specifications so referred to, to the extent that such supplementary or superseding specifications are in effect on March 1, 1951, if the Contractor was furnished or otherwise notified of the existence of such supplementary or superseding specifications.
(e) Late Delivery of Data.—It is understood that the efficient use by the Government of the supplies called for hereunder requires that the data called for hereunder be delivered not later than the time or respective times herein specified. If such data is not delivered at said time or times, the Government may at its election, so long as such data remains undelivered, unless the delay in delivery thereof is an excusable delay as such term is defined in Clause hereof entitled “Default”, withhold payment to the Contractor for any of the supplies theretofore delivered to the Government, refuse approval of the Contractor's vouchers and refuse to accept further deliveries hereunder from the Contractor or take any other action authorized by law or regulation now or hereinafter in effect including termination of this contract for default to the extent and in the manner authorized by the Clause hereof entitled “Default” and may take any or all of the foregoing actions separately or in combination.
(f) Facilities. It is recognized that the commitments of the Contractor hereunder are contingent upon the use of facilities, in the amount of $20,380,000.00, authorized under special Facilities Contract AF 33 (038)-18504 on a no-charge basis. In the event that rental is required for the use of such facilities or rental for Government-owned facilities used in production of the aircraft called for herein not covered by said facilities contract, is increased or decreased, the airplane prices shall be adjusted accordingly to eliminate or compensate such rental increase or decrease.
(9) Engineering Services.-Engineering services and assistance required by the Contractor through December 1952 or such further time as the Government may determine from time to time shall be procured from Republic Aviation Corporation by the Government under a separate Supplies Contract with Republic and shall be delivered by the Government to the Contractor to the extent deemed necessary for the Contractor to deliver to the Government F-84F aircraft and spare parts in accordance with delivery schedules established herein.
(h) Government Loaned Property.—The Government may loan to the Contractor for use in the performance of this contract, in accordance with the provisions of a Blanket Bailment Agreement, such Government-owned Property as in the opinion of the Contracting Officer will facilitate the expeditious completion of this contract. However, this shall not be construed as effecting the bailment of such property nor as a commitment that such loan will be made, except as to one (1) F-84F airplane which shall be loaned to the Contractor five (5) months prior to the delivery date of the first airplane called for in Item 1.
(i) The Contractor's ability to meet the delivery schedule will depend upon the right to use the Fairfax Municipal Airport as required to test the airplanes. The Contractor will not be responsible for compliance with the delivery schedule during any periods in which the airport proves inadequate or unavailable for the purpose.
(j) Production Acceleration Insurance Program.—In the performance of this contract the Contractor shall fabricate and/or acquire tooling (dies, jigs, fixtures, etc.) to accomplish a production rate of 50 airplanes per month, however, such tooling shall be of the design and durability to accomodate a production rate of 236 airplanes per month for a minium period of two (2) years. But rates referred to herein contemplate production on a two-shift, 8-hour, 5-day work-week. It is recognized that the Item prices set forth in paragraph (a) above contain a factor to cover the cost of said tooling. Such tooling shall be subject to the provisions of Clause 44 hereof entitled “Special Tooling”.
PART II, DELIVERY
(a) The Contractor shall deliver to the Government the articles and supplies in Part I in accordance with the following schedule :
PART III. PRESERVATION, PACKING, PACKAGING, AND MARKING Preservation, packing, packaging and marking shall be in accordance with Exhibit "2" attached hereto.