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Mr. BATEs. Of course, it answers itself, doesn't it?
Mr. GORDON. Yes.

Mr. BATEs. So we must be concerned about the dollars involved in these things.

Mr. GORDON. That is right.
Mr. BATES. I would like to get into that matter later on today.
Now, who was the primary source for this plane!
Mr. GORDON. Republic Aircraft.

Mr. Bates. And what was their margin of percent compared with your 11 percent? Do you have those figures?

Mr. GORDON. I don't know. I have no figures. I have no figures as to what their costs or percentage of profit or return on investment or anything else was.

Mr. BATES. Do we have those ?

Mr. GORDON. I am sure those figures are in the hands of this committee, though, through the investigations that they have pursued.

Mr. COURTNEY. They are in the published book.
Mr. BATES. Yes. Does counsel know what they were?

Mr. COURTNEY. Offhand, I don't recall them. I think there were 5 contracts, or 6 contracts reported over a period of time. Of course, the profit rate as reported varied between the two.

Mr. Gavin. Would the gentleman yield at that point? Do you recall the unit cost?

Mr. COURTNEY. Again, that varied in the different contracts. I can supply the information.

Mr. Bates. I do think for comparative purposes we should put it in the record.

Mr. COURTNEY. We have it. Mr. BATEs. Mr. Chairman, in view of the fact we are meeting this afternoon, I will yield back my time.

Mr. HÉBERT. The committee will stand in recess until 2 o'clock this afternoon.

Mr. RIVERS. Mr. Chairman, I will not be back. I can't be back.

(Whereupon, at 12:15 p. m., the subcommittee recessed to reconvene at 2 p. m. of the same day.)

(The supplemental material attached to the statement of Mr. Gordon is as follows:)

Exhibit A.The principal delivery schedule changes and the actual aircraft deliveries, contract No. AF 33(038)–18503

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EXHIBIT A.The principal delivery schedule changes and the actual aircraft deliveries, contract No. AF 33(038)–18503Continued

Cumulative deliveries

Final

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Letter
contract,
Dec. 22, 1950

Definite

contract, Apr. 25, 1952

Official U. S.

Air Force,
July 11, 1952

Supplemental
agreement

No. 16,
May 28, 1953

CON NO. 53.
Aug. 20, 1953

Proposal,
Dec. 21, 1953 1

Supplemental
agreement

No. 31,
Oct. 13, 1954

CON No. 131,
Oct. 15, 1954

Month

Conditional

1 Final delivery for 1st 46 planes. Aug. 13, 1957.

EXHIBIT I

BUICK-OLDSMOBILE-PONTIAC ASSEMBLY DIVISION,

GENERAL MOTORS CORP.,

Detroit, Mich., July 15, 1954. To: Commander, Headquarters Air Materiel Command, Wright-Patterson Air

Force Base, Ohio.

Attention: MCPPAF-4. Through: Air Force plant representative, Mobile Air Materiel Area, Air Mate

riel Command, Buick-Oldsmobile-Pontiac Assembly Division, General Mo

tors Corp., Kansas City, Kans. Subject: Proposal for redetermination of prices of F-84F aircraft produced on

contract No. AF 33 (038)-18503. Pursuant to the revision-of-prices clause of contract No. AF 33(038)–18503, the contractor submits for the purpose of price redetermination proposed prices for the first segment of 71 F-84F airplanes, and forward prices for 528 airplanes ordered under this contract. A separate price proposal with respect to spare parts will be made in the near future.

PRICES

The contractor proposes a retroactive price of $2,391,596 for each of the first 71 airplanes, or a total aggregate amount of $169,803,316, as set forth on schedule A attached. On this basis, the contract price for the first 71 airplanes should be increased by the sum of $49,983,716.

It is appreciated that the principal causes of the increase over the contract unit price of $1,687,600 are known to the Air Materiel Command. Nevertheless, believing it appropriate to review them at this time, the contractor has prepared and attached to this proposal a summary of the more important contributing factors.

The forward prices proposed for the remaining 528 planes ordered under this contract as set forth on schedule B, attached hereto, summarized as follows:

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The proposed retroactive price for the first 71 aircraft includes the price effect of complying with the engineering changes on contract change notifications per schedule A-2 attached.

The proposed forward prices are based on specifications for the 71st F-84F airplane; and include no provision for engineering changes other than the contract change notifications set forth on schedule A-2 which were incorporated in the 71st airplane. Price changes for complying with engineering changes having an effective point subsequent to plane No. 71 will be negotiated under the "Changes" article of the contract.

DELIVERY SCHEDULE

The forward prices proposed herein are based upon the present delivery schedule as set forth in contract change notification No. 85, and will be subject to change in the event of any substantial revision to that delivery schedule.

BASIS OF PRICE COMPUTATIONS In the computation of prices, both retroactive and forward, the contractor has given consideration to the agreements made between General Motors Corp. and the Air Force with respect to the cost of certain work which was to be excluded from the profit base; and to negotiations with the Government concerning pension plan provisions and General Motors central office expense.

QUALIFICATION OF PRICES

The proposed retroactive and forward prices are subject to further change upon determination by the Government of “ true depreciation” applied for by Cessna Aircraft Co., Beech Aircraft Corp., Saginaw steering gear division, General Motors Corp., and Fisher body division, General Motors Corp.; and for price adjustments resulting from price redeterminations of the following subcontractors currently in process :

Acton Manufacturing Co.
Cessna Aircraft Co.
Beech Aircraft Corp.
Flour City Ornamental Iron Co.
Lennox Furnace Co.
Norge division, Borg-Warner Corp.
Vendo Co.

GENERAL If this proposal meets with your approval, your acceptance should be evidenced by an appropriate supplement to the subject contract incorporating the revised prices.

GENERAL MOTORS CORP.
BUICK-OLDSMOBILE-PONTIAC ASSEMBLY DIVISION,
JOHN F. GORDON,

Vice President.

REVIEW OF PRINCIPAL FACTORS OF THE INCREASE OVER CONTRACT PRICE OF THE

FIRST 71 F-84F AIRPLANES

PROGRAM CHANGES

The contractor's original price proposal for the first 71 F-84F planes was made September 26, 1951, and culminated in a definitive contract, dated April 25, 1952, which called out a price per plane of $1,500,850. As the result of a delivery schedule change made in December 1952, this price was increased by $186,750 to $1,687,600 covered by a supplement to the contract dated May 28, 1953. This price still stands in the contract.

From the foregoing it may be observed that the factors upon which the present contract is based are those which were current back in the fall of 1951, with the single exception of the effect of the Deceniber 1952 delivery schedule change.

Since September 1951, many changes in the product and the program have taken place and these changes have had an important impact on the proposed price.

Some of the more significant developments are:

1. As a new product the F-84F airplane was not proven in test flight until early in 1953. This resulted in a heavy and continuous flow of corrections and redesign data. Furthermore, the lead time of the prime design contractor's equivalent planes, originally established at 8 months, was drastically reduced by changes of that company's delivery schedule. This deprived BOP of the benefit of the prime design contractor's efforts to eliminate design troubles in production.

2. The delay in receipt of engineering data and the heavy volume of corrections and design changes created a need for more toolmarkers, tool designers and engineers than would normally be required; however, there was a critical shortage of manpower in these fields, making it difficult for the contractor to maintain the program timetable.

3. Important changes to be incorporated in the 47th airplane, such as the maneuvering stabilizer, which also necessitated major redesign of the aft fuselage section; new speed brakes, and many other changes caused production delays. Complete engineering data on the maneuvering stabilizer, originally scheduled for June 1952, was delayed more than 1 year; and its redesign was required as late as 1954.

4. From the beginning the program was retarded by failure to receive sufficient priority for machinery and equipment, creating the necessity for improvised methods and the use of substitute machinery.

5. The schedule on which the price of $1,687,600 each for the first 71 planes was based, called for 83 planes by the end of 1953 and acceleration to a peak of

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