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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 recog. nized 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, 88: 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. 0. P., as divisional comptroller. He has been so employed since January 1, 1949.

In this capacity he is the chief financial officer of B. 0. 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. 0. 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. 0. 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. 0. P. under contract No. AF 33 (038)18503 to the Vendo Co. and covered 237 fork fairing assemblies ultimately in. creased 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 Air Force contracting officer and copies were given to the Air Force.

28.

Price redetermination negotiations between B. 0. 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: Quantity : Unit price Quantity-Continued

Unit price 4. $4, 599. 51 5_

$1, 751. 31 2_ 4, 600. 35 25.

1, 751.83 19. 4, 612. 21 20.

1, 755. 53 20. 1, 752. 91

1, 755. 66 5_ 1, 741. 05 1.

1, 746. 02 18_ 1, 750. 69 87.

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 : Quantity:

Prices
Quantity-Continued

Prices
25.-
$7, 196. 47 13..

$400. 09 114_

1, 507. 22
100.

400. 97
98
399. 50 349.

404. 03 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. 0. 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.

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SUBCOMMITTEE FOR SPECIAL INVESTIGATIONS,

ABMED SERVICES COMMITTEE,

Thursday, August 27, 1957. A. F. POWERS, Esq., Assistant General Counsel,

General Motors Building, Detroit, Mich.: Re your letter August 21 and affidavit of H. W. Clapsaddle, subcommittee considered affidavit inadequate information required for understanding by subcommittee of record on that subcontract purchase. Also, subcommittee desires complete information from General Motors concerning accuracy of General Accounting Office report to subcommittee on August 21 record, pages 795 through 806. As to whether or not GM agrees that General Accounting report adequately and completely reflects state of books and accounts as represented, request have qualified witnesses of your company present on Thursday, August 29 at 10 o'clock forenoon in subcommittee room authorized to speak on aforesaid records and reports. Am telephoning you today. Urgent we receive your advice immediately because of prospective adjournment.

JOHN J. COURTNEY, Special Counsel, Subcommittee for Special Investigations, Armed Serv

ices Committee.

DETROIT, MICH, JOHN J. COURTNEY,

Special Counsel, House of Representatives Committee on Armed Services,

Subcommittee for Special Investigations, Old House Office Building,

Washington, D. C.: Re your telegram, my letter of August 21 and affidavit of H. W. Clapsaddle, impossible to review data and have qualified witnesses available in Washington to testify Thursday. We are analyzing General Accounting Office report, transscript and available records to clarify the record on the subcontract which was the subject matter of the affidavit. With respect to General Accounting Office compilation in August 21 record, pages 795 through 806, Buick-Oldsmobile-Pontiac representative will be in Kansas City tomorrow to check compilation against books and accounts. Believe all data can be checked and report sent to you this week.

A. F. POWER, Assistant General Counsel, General Motors Corp.

DETROIT, MICH. JOHN J. COURTNEY,

Special Counsel, House of Representatives Committee on Armed Services,

Subcommittee for Special Investigations, Old House Office Building,

Washington, D. C.: Re your wire of August 27, 1957. Supplemental affidavit of H. W. Clapsaddle will be mailed Friday, August 30, 1957. With respect to your request for complete information concerning accuracy of General Accounting Office report to subcommittee on August 21, 1957, set forth on pages 795 through 806 of record, com. pilation of material cannot be completed until next week. In view of this your request for advice whether the report adequately and completely reflects the state of books and accounts as represented can only be answered broadly and generally by tomorrow, August 30. If the subcommittee desires detailed and accurate verification answer cannot be given until detailed audit is completed next week. This General Accounting Office compilation had not been checked against our records when we received your wire on August 27 although a copy was the August 21 transcript which we received August 22, 1957. Upon receipt of your wire 2 men were sent immediately to our Kansas City plant to commence the checking of this information and 4 men in Detroit were immediately assigned to reviewing such records as have been transferred from Kansas City to Detroit. Even if these men continue the verification of this information through the Labor Day weekend the task cannot be accomplished before Friday, September 6, 1957. Unless we hear from you to the contrary, I will assume that you are interested in detailed verification rather than the general answer which could be supplied to you August 30.

With respect to your request for witnesses to appear before your committee on August 29 to discuss the aforesaid records, may I advise that both Mr. Gordon and Mr. Mark were and are away from Detroit on their vacations. Mr. Gordon was called back from his vacation to assemble data and information and to be present before your subcommittee on August 15 and 16. Immediately after August 16 he resumed his vacation. Mr. Mark delayed his vacation because of the August 16 hearing. He too left on his vacation immediately thereafter.

Even if these men had been in Detroit on August 27 they would not have been qualified to speak on the aforesaid records until the verification of the GAO compilation which is presently underway had been completed.

A. F. POWER, Assistant General Counsel, General Motors, Corp.

SUBCOMMITTEE FOR SPECIAL INVESTIGATIONS,

ARMED SERVICES COMMITTEE,

Friday, August 30, 1957. Mr. A. F. POWERS, Assistant General Counsel,

General Motors Corp., Detroit, Mich.: Re your telegram August 29. Subcommittee desires detailed verification General Accounting Office audit report in record August 21. Request that data be furnished in writing to me when completed. House adjourning today, subcom. mittee will convene especially to hear witnesses later and after staff evaluation of data you submit. From your wire assume data will be here about September 11.

Request you confirm exact date by letter. No witnesses needed until after that date.

JOHN J. COURTNEY,
Special Counsel, Subcommittee for Special Investigations,

Armed Services Committee.

GENERAL MOTORS CORP.,

Detroit 2, Mich., September 10, 1957. Mr. JOHN J. COURTNEY,

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 your telegram of August 27, 1957, there is submitted herewith the affidavit of Mr. H. W. Clapsaddle setting forth the results of the review by Buick-Oldsmobile-Pontiac assembly division of the General Accounting Office compilation submitted to your subcommittee and included in the stenographic transcript of the hearings of August 21.

There is one other matter which appeared in the transcript of August 21, 1957, which we believe requires clarification. On pages 773 through 776 of the transcript, the letter of August 2, 1957, from Mr. Dudley C. Sharp, Assistant Secretary of the Air Force, addressed to the Comptroller General of the United States, is set forth. Reference is made therein to the request by the Air Force for advice from General Motors concerning the dates when changes to purchase orders involved in the $1,700,000 questioned by the Comptroller General were approved by the Air Force or were furnished to Air Force personnel.

For the purpose of the record, this request was set forth in the letter of July 26, 1957, from George W. Thompson, lieutenant colonel, United States Air Force, Chief, Pricing Staff Division, Deputy Director for Procurement, addressed to John F. Gordon, vice president, General Motors Corp. On Monday, August 12, the letter of reply dated August 10 from Mr. Gordon was delivered personally to Lt. Col. George W. Thompson.

In the August 10 reply the procedure followed with reference to purchase orders and purchase order revisions was detailed. A copy of this letter is attached for the records of your subcommittee.

We are providing this information in view of the possible misinterpretation which might be given to the following statement in Assistant Secretary Sharp's letter:

"In accordance with a quite common practice, the purchase orders, which would indicate any revision of prices, after approval by the Air Force were returned to the contractor and copies were not retained.”

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