Page images
PDF
EPUB

bursement type of contract; that it was in fact a fixed price subject to price redetermination type of contract; and that in the price redetermination negotiations the parties negotiated price and not segregated cost elements.

That the Compilation of the General Accounting Office is directed at the "Estimated Material Costs" submitted by Buick-Oldsmobile-Pontiac Assembly Division in support of a proposed unit price of $442,890 for the second segment of 228 airplanes; that this price was not the negotiated price for these airplanes; that the ultimate unit price negotiated was $420,000; that the facts with respect to the negotiation of the proposed prices and the prices ultimately agreed to are set forth in the letter of October 25, 1956, addressed by John F. Gordon to Brigadier General William T. Thurman, set forth on pages 73 through 80 of the transcript, reading in part as follows:

"*** At the opening of the conference on September 8, 1954, a revised proposed price of $440,000.00 was submitted by the contractor. This reduced price reflected the elimination of certain cost which took place after the first proposal was submitted in July. The first three days and part of the fourth day of the conference were spent in reviewing and discussing the Air Force Audit Reports covering both Fisher Body Division and Buick-Oldsmobile-Pontiac Assembly Division, the Contracting Officer's comments on cost and operations, and the detailed price buildup of the proposal of the Buick-OldsmobilePontiac Assembly Division. On the fourth day, September 11, 1954, the Air Force submitted its first counter proposal on price. There then followed an exchange of suggested prices and a final determination and agreement on the price of $420,000.00 per plane. This represented an aggregate reduction through negotiation of approximately $4,560.00 in the price of the second segment of 228 planes from the price proposed by the contractor at the commencement of negotiations.”

H. W. CLAPSADDLE.

Subscribed and sworn to before me this 10th day of September 1957. VIRGINIA H. MILLAGE, Notary Public, Wayne County, Michigan.

My commission expires November 29, 1957.

WASHINGTON, D. C., October 14, 1957.

Hon. F. EDWARD HÉBERT,

Chairman, Special Investigations Subcommittee,

Committee on Armed Services, House of Representatives.

DEAR MR. CHAIRMAN: Reference is made to your letter of July 19, 1957, and the hearings on our report to Congress on Air Force contract AF33 (038)-18503 with General Motors Co., Buick-Oldsmobile-Pontiac assembly division, Kansas City, Kans. We have been advised informally that at this time you have no plans for holding further hearings this year.

You will recall that some of the matters raised by our examination of this contract involved legal questions which are properly for consideration by the Department of Justice. With this in mind and in order to fully discharge our responsibilities with regard to protecting the Government's interest, we have formally referred the matter to the Department of Justice.

In order that you may be fully apprised of the current status of this matter within the General Accounting Office, we are enclosing a copy of our letter to the Attorney General formally transmitting this matter for his consideration. Sincerely yours,

FRANK H. WEITZEL,

Acting Comptroller General of the United States.

WASHINGTON, D. C., October 14, 1957.

The honorable the ATTORNEY GENERAL.

DEAR MR. ATTORNEY GENERAL: There is transmitted herewith for appropriate action a claim against the Buick-Oldsmobile-Pontiac assembly division of General Motors Corp. arising out of misrepresentations made by it to the Air Force in connection with the pricing of F-84F airplanes under contract No. AF33 (038) – 18503.

Two copies of our audit report to the Congress on our review of this contract are enclosed. The facts relating to the misrepresentation involved are set forth at pages 5-7 of the report, indicating an overstatement of $1,700,000 by the contractor. Two photostatic copies of the contractor's price proposal and supplement thereto are enclosed. Hearings on the report have been held by the Subcommittee on Special Investigations of the House Armed Services Committee, and we understand further hearings may be held after Congress returns. A transcript of the complete hearings to date is enclosed. There are also enclosed 2 copies of the reply dated August 2, 1957, which we received from the Air Force in response to our inquiry of July 8, 1957 (appendix D to our report). Also, with reference to questions 4 and 5 of our inquiry, there is enclosed 1 copy of an affidavit and other information furnished to the subcommittee by General Motor's letter dated September 10, 1957, wherein General Motors advises that there was an additional overstatement of $375,000, bringing the total amount to some $2 million. The testimony of Mr. B. D. Leofburrow, the chief price negotiator for the Air Force, gives more detailed support for the statements made in paragraph 6 of the Air Force letter of August 2, 1957.

On the basis of the above-mentioned information, it is our belief that there was a misrepresentation of material facts to the Air Force, that the Air Force officials negotiating the prices of the first and second segments of airplanes relied upon such misrepresentations, and that the Government was damaged thereby, presumptively in the amount of $2 million, raising a question of recovery for civil fraud. You may also wish to consider the possibility of criminal liability on the part of the contractor or its employees.

The Renegotiation Board has been furnished copies of our audit report and has been following the hearings. We understand that the Board now has under consideration the profits made by General Motors during 1955, and has expressed interest in the $2 million in question.

We will be glad to consult with representatives of your Department and to furnish any additional information we have in the matter.

Sincerely yours,

JOSEPH CAMPBELL,

X

Comptroller General of the United States.

[merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][ocr errors][merged small][ocr errors]
[ocr errors][merged small][ocr errors]
« PreviousContinue »