ule required. The third portion deals with the method of solicitation and the responses which are expected. I don't see how anyone could possibly misconstrue the intent of the Air Force, nor how you could fail under these circumstances, and the committee feels the same way, in getting good technical proposals and having an opportunity to fully evaluate them and develop prices about which there can be no concern. General THURMAN. Thank you, Mr. Counsel. Let's have a hearing on that one. Mr. HÉBERT. Don't worry, we will. Thank you, General. The committee will stand adjourned, subject to call of the Chair. Mr. COURTNEY. Subject to the affidavit. Mr. HÉBERT. Subject to the affidavit. (Whereupon, at 3:20 p. m., the subcommittee was adjourned, subject to the affidavit.) (The following data were received by the committee subsequent to the last hearing date:) Mr. JOHN F. GORDON, Vice President, General Motors Corp., WEDNESDAY, AUGUST 21, 1957. Buick, Oldsmobile Division, Detroit, Mich. : Subcommittee is holding record open pending receipt of affidavit which your company agreed to file with General Accounting Office for use and information of subcommittee. Advise when document will be received and copy sent to subcommittee. Urgently necessary to conclude hearings promptly. F. EDWARD HÉBERT, Chairman. SPECIAL INVESTIGATIONS SUBCOMMITTEE, JOHN F. GORDON, Vice President, or A. F. POWER, General Counsel, General Motors Corp., Buick Division, Detroit, Mich.: Reurtel Wednesday, August 21, advising affidavit General Motors promised to file with subcommittee was being mailed to me night of Wednesday, August 21. No communications received Thursday, August 22. None this morning August 23. Advise return wire. Report delivery. F. EDWARD HÉBERT, JOHN J. COURTNEY, Special Counsel. DETROIT, MICH. Chairman, House of Representatives, Committee on Armed Services, Subcommittee for Special Investigations, Suite 306, Old House Office Building, Washington, D. C.; Re your telegram to John F. Gordon, General Motors Corp. Affidavit being mailed tonight to Mr. Courtney with signed copy to the Comptroller General of the United States. A. F. POWER, Assistant General Counsel, General Motors Corp., DEAR MR. POWER: When your letter was not received this morning containing the affidavit which the subcommittee had been promised, I wired you at 9:55, our time. Shortly after that wire was sent, your transmittal was received and I countered with a followup wire, copy of which is enclosed. For your records, the envelope containing your transmittal was duly postmarked August 21, 10: 30 p. m., from Detroit, Mich. I shall explain to the chairman that the delay was entirely due to delay in the mail. I thought you would like this information to be in your files in view of the exchange of telegrams. Sincerely yours, JOHN J. COURTNEY, Special Counsel. Mr. JOHN J. COURTNEY, GENERAL MOTORS CORP., Detroit, Mich., August 21, 1957. Special Counsel, House of Representatives Committee on Armed Services, Subcommittee for Special Investigations, Old House Office Building, Washington, D. C. DEAR MR. COURTNEY: In accordance with the statement made by me at the hearing before the Subcommittee for Special Investigations, Committee on Armed Services, House of Representatives, on Friday, August 16, 1957, that I would submit to the committee an affidavit setting forth the facts relating to Revision No. 15 of Purchase Order No. KDS-9328 issued to the Vendo Co., at Kansas City, I am enclosing herewith the affidavit of Mr. H. W. Clapsaddle, divisional comptroller of Buick-Oldsmobile-Pontiac assembly division of General Motors Corp. At the hearing, one of the committee members, Mr. Hardy, referred to the statement in the report of the General Accounting Office, reading as follows: "Although the supplier and the contractor had redetermined the price of this assembly prior to the submission by the contractor of his proposal, the reduction in price was not recognized in the proposal." He inquired as to why we failed to comment on this statement when the proposed report was submitted to us by the General Accounting Office. I am informed that representatives of Buick-Oldsmobile-Pontiac assembly division and a member of our legal staff interpreted the phrase "the reduction in price was not recognized in the proposal" as meaning that the proposal reflected the price of $1,507.22 as applicable to the first 68 units of the second segment but did not reflect the lower price of approximately $400 a unit applicable to the remaining 160 units of the second segment. This interpretation was based on the statement in the report immediately preceding the above quotation, reading as follows: "However, this price applied to only the first 68 assemblies and the remaining 160 assemblies were priced at approximately $400 per unit, a total reduction of $177,000." On the basis of such an interpretation, the report was correct and accordingly, our comments were directed only to an explanation as to why we used the higher price applicable to the first 68 units in developing our estimated prices for the entire 228 units of the second segment. If, on the other hand, the General Accounting Office intended to convey the impression-and we question that it did—that no price reduction effected through the redetermination of prices with Vendo Co. and by revision No. 15 was recognized in our proposal, the statement is incorrect. As can be seen from the affidavit of Mr. Clapsaddle, the price of $1,507.22 for the first 68 units of the second segment represented a reduction in the price of approximately $1,750 which was applicable to all of the units in the second segment prior to the establishment of the redetermined prices by revision No. 15. I trust the foregoing clarifies any misunderstanding that has developed with respect to the redetermination of prices with Vendo Co. and the facts with respect to the prices in effect under revision No. 15 at the time that the contract prices were first redetermined with the Air Force. Very truly yours, Assistant General Counsel. AFFIDAVIT STATE OF MICHIGAN, County of Wayne, ss: H. W. Clapsaddle being first duly sworn, deposes and says that he is a resident of Grosse Pointe Park, Mich., and that he is employed by General Motors Corp., Buick-Oldsmobile-Pontiac Assembly Division, hereafter referred to as B. O. P., as divisional comptroller. He has been so employed since January 1, 1949. In this capacity he is the chief financial officer of B. O. P. and all of its financial documents and records are under his control and supervision. This includes the records and documents of B. O. P. for contract No. AF 33 (038)-18503. He reviewed and approved all of the data and material submitted by B. O. P. to the Air Force pursuant to clause 41 Revision of Prices (retroactive for first period) of the contract. In the proceedings before this committee on August 16, 1957, reference was made to a purchase order KDS-9328 issued by the Kansas City, Kans., plant of B. O. P. to the Vendo Co., Kansas City, Mo. The original purchase order was dated September 4, 1951, and not September 4, 1954, as might be inferred from the record of the testimony. It was isued by B. O. P. under contract No. AF 33 (038) – 18503 to the Vendo Co. and covered 237 fork fairing assemblies ultimately increased to 726. Initially, this purchase order was issued with the following provision with respect to price: "price to be determined." In addition, it provided as follows: "Seller agrees to furnish buyer with cost statement periodically upon request of buyer or the Government and the prices specified herein may be revised upward or downward periodically by negotiations between buyer and seller at the request of either buyer or seller." Subsequently it was revised to include the following provision: "It is understood that seller will establish tentative billing prices and will produce parts under this purchase order as required by buyer's schedules and that seller will maintain complete and accurate cost records on this production in accordance with seller's normal accounting practice. Based on current schedules, on or before October 5, 1953, seller will present certified complete cost statements to buyer on all items shipped as of September 20, 1953. Seller and buyer will then negotiate in good faith to establish firm unit prices which will be applicable to parts delivered and to be delivered under this purchase order. "Thereafter, seller agrees to furnish buyer with certified cost statements periodically upon request of buyer or the Government and the prices of the undelivered articles covered by this purchase order may be revised upward or downward periodically by negotiation between buyer and seller at the request of either buyer or seller." This purchase order and revisions were submitted to and approved by the Ai Force contracting officer and copies were given to the Air Force. Price redetermination negotiations between B. O. P. and Vendo Co. were conducted in the period between June 8 and June 30, 1954. By letter dated July 9, 1954, Vendo Co. supplied the supporting detail for the prices discussed on June 30, and confirmed the tentative agreement which had been reached with respect to all the prices on the aforesaid purchase order. Under purchase order No. KDS-9328, as amended by revisions No. 1 through No. 14, the prices in effect at the time of these discussions were as follows: Unit price Quantity-Continued Quantity: 4_ 2 19. 20. 5. 18_ $4,599. 51 Unit price $1, 751. 31 1,751. 83 1, 755. 53 1,755. 66 1, 746. 02 1, 752.32 Under date of August 6, 1954, B.O.P. prepared purchase order revision No. 15 to purchase order No. KDS-9328 for issuance to Vendo Co. This revision established the following redetermined prices: Purchase order revision No. 15 was submitted to the Air Force contracting officer at the B. O. P. plant for his approval on August 6, 1954. This approval was evidenced in writing by the Air Force contracting officer on August 18, 1954. Purchase order revision No. 15 was transmitted to Vendo Co. B. O. P.'s files do not disclose the date of transmittal. The acceptance of this purchase order revision and of the prices set forth thereon was acknowledged by the Vendo Co. on September 27, 1954. This acknowledgement finalized the agreement on the redetermined prices. A photostat of purchase order revision No. 15 to purchase order No. KDS-9328 is attached hereto and made a part hereof. A photostat of this revision No. 15 was filed with the Subcommittee for Special Investigations, Committee on Armed Services, House of Representatives, and was made a part of the record of the afternoon session of the hearing on Friday, August 16, 1957, at page 646 of the record. The prices set forth in this revision No. 15 remained unchanged thereafter except for slight increases in the prices for the last 4 of the 6 quantities specified, due to subsequent engineering changes. The priced bill of material submitted to the Air Force under date of August 26, 1954, contained a unit price of $1,507.22 for the fork fairing assembly covered by purchase order No. KDS-9328. This unit price was applicable not only to the last 46 of the airplanes delivered in the initial segment of 71 but was also applicable to the first 68 of the airplanes of the second segment of 228 planes. H. W. CLAPSADDLE. Subscribed and sworn to before me this 21st day of August 1957. VIRGINIA H. MILLAGE, Notary Public, Wayne County, Mich. My commission expires November 29, 1957. 94763-57-24 |