GENERAL MOTORS CORP. BUICK-OLDSMOBILE-PONTIAC ASSEMBLY DIVISION Analysis of burden by quarters, period July 1, 1954, through end of contract Mr. COURTNEY. Now, Mr. Chairman, in addition to obtaining the pricing proposal which has now become a part of the record, under paragraph 3.811 of the Armed Services Procurement Regulations, the negotiators are required to record, and do record and have recorded, their version of their experiences and the data available to them during the course of the negotiation. That data has been obtained from the Air Force and it is this copy on your desk, the white sheets before you, a memorandum dated May 6, 1955. It has 21 paragraphs in it and is identified by Carl F. Damberg, colonel, U. S. Air Force, Chief, Aircraft Division. The first the beginning of the reconstruction of the experiences at the negotiating table commenced with paragraph 20, and I read: A profit rate of 8 percent was agreed upon at the time this contract was placed. This is a normal profit rate for a procurement of this type. The negotiated price of $271,165 per unit includes a profit factor of not more than 8 percent based on the Government's concept of a realistic cost. Mr. Chairman, I should like to offer for the record the minutes of the negotiating team as approved and a part of the Air Force records of this contract. Mr. HÉBERT. Without objection. (The information is as follows:) To: Buick-Oldsmobile-Pontiac Division, General Motors Corp. (Attention: Miss Corkum.) MAY 6, 1955. 1. Conferences were held on March 23, 24, and 25, 1955, with representatives of Contractor to redetermine prices for the last three hundred (300) F-84F airplanes on subject contract. This is the final price redetermination of the 599 airplanes on this contract. Thus, for all practical purposes, the redetermined price for this segment of airplanes is fixed price to completion. Those present were: Representing the Contractor: Mr. J. M. Clapsaddle, Division Comptroller, GMC, Detroit, Mich. Mr. William J. Oldani, Attorney, Office of Chief Counsel, Detroit, Mich. Mr. C. F. Hintz, Comptroller's Office, Detroit, Mich. Mr. J. A. McNamara, Resident Comptroller, BOP, Kansas City, Mo. Representing the Government: Lt. Col. R. C. Chilton, MCPHFD Miss Alice Corkum, MCPHFD Lt. Col. J. R. Medberry, AFPR, BOP, Kansas City, Mo. Mr. Howard Goebel, ACO, BOP, Kansas City, Mo. Mr. Milton Richmond, MCRKC, BOP, Kansas City, Mo. Mr. Wm. P. Lemley, Auditor General's Office, BOP, Kansas City, Mo. Mr. James I. MacKenzie, Auditor General's Office, Detroi, Mich. Mr. John J. Ambrose, MCPBIA Mr. Werner Wilson, MCPHF Mr. Steve Lovas, MCPHF (attended only March 25, 1955) Mr. Richard C. Saxton, MCPHH 2. Contractor, by letter dated February 3, 1955, proposed a price of $293,160 per unit for these 300 F-84F airplanes. In addition to detailing the various elements of cost comprising this proposed price the letter also furnished infor mation concerning actual costs incurred on the preceding 228 airplanes. As a result of negotiation, the redetermined price was negotiated at $271,165 per airplane. This price negotiated amounts to a total reduction in the Contractor's proposal of $6,598,500 or an overall reduction in contract price of $16,150,500. 3. Prenegotiation conferences attended by the aforementioned Air Force Personnel were held on 21 and 22 March 1955. During these two (2) days the Contractor's proposal was examined and evaluated, audit reports reviewed and supplemental data obtained. The views, comments and recommendations of the field personnel and other members of the buying team were aired and weighed. Personnel assigned to the AFPR's office had made an analysis of the Contractor's proposal and compared estimated costs with recorded book costs. The following is a résumé of the findings and comments of the AFPR: Material costs from other (Allied) GMC affiliates represent reasonable billings and firm quotations for the items furnished except Fisher Body; no opinion regarding this supplier was available from the AFPR because a separate Air Force audit of Fisher's costs had not been examined. Other vendors' costs had been examined at Contractor's plant and it was found that the latest redetermined prices and miscellaneous errors would amount to a reduction of 0.5 percent or $448.00 per unit to which Contractor had acquiesed; otherwise outside materials were correctly priced. All subcontracts except one had now been approved by the ACO and there was little question about resolving that one. The observation was made that the 17,250 direct labor hours per unit proposed by Contractor were high but a better number was not suggested. Burden was believed overstated since it appeared the Contractor would complete this contract ahead of schedule and the burden projection covered the schedule period. Superburden was questioned because Contractor's proopsal for overtime premium was in excess of 3 percent of total labor hours. It was the opinion of the AFPR that 3 percent was an allowable amount irrespective of historical actuals or Contractor's reason for this forecast. Other cost elements were believed questionable. 4. The office of the Auditor General submitted two (2) "Advisory Reports for Price Redetermination" which were used for reference in this negotiation. The audit of Fisher Body Division, supplier of the forward fuselage, longerons and miscellaneous small parts, was confined to the actual recorded costs on the 228 units produced prior to these 300 units. Fisher refused to make available to the AF auditors any costs after the cut-off date, October 31, 1954, for the 228 forward fuselages. However, the Air Force auditors in examining the books and records of Fisher for the 228 units made certain notes and observations of overhead rates and labor hours incurred in November and December 1954. The second "Advisory Report" covered BOP costs on the preceding 228 airplanes. The auditing personnel who conducted the examinations and submitted the reports were present for the negotiations. 5. An evaluation, limited to Contractor's projected direct labor hours, was also made by MCPBIA, utilizing AMPR operating ratios. Actual direct labor hours for 210 units as reported by Contractor were presented with a future trend projected. This study developed a forecast that 4,540,308 direct labor hours would be a reasonable and acceptable estimate for these 300 airplanes. Contractor proposed 5,175,000 direct labor hours. In developing the 4,540,308 hours, MCPSIA also utilized in their presentation the industry average for fighter air |