Mr. BROWNSON. That telegram was dated July 20, 1953, stating that the two then current contracts were to be declared in default as of July 28, 1953, unless the firm should show cause why they should not. Mr. PEED. That is correct, and from that point on this correspondence that I spoke of a moment ago ensued, and we delayed actually declaring them in default until the 16th of this month. Mr. BROWNSON. Of this current month? Mr. PEED. That is correct. I think that was the date. Mr. BROWNSON. That was after we opened this investigation and our staff people had contacted you? Mr. PEED. Yes. The thing was still under discussion in our organization. Mr. BROWNSON. I will have the counsel hand you a photostat of another memorandum, exhibit 21. (Exhibit 21 is as follows:) In reply refer to: FSI-2. EXHIBIT 21 FEBRUARY 23, 1954. Chief, Purchase Branch 2, Attention: Miss D. Queen. Chief, Section 2, Inspection Branch, Central Office, Washington, D. C. Contracts GS-03P-65 (EC), GS-03P-287 (EC), Hexylresorcinol Pills. Retort Pharmaceutical Co., Inc. There is attached a copy of the Food and Drug Administration report on their examination of subject pills. Since the report shows failure to comply with specifications, these pills have been rejected. This is the fourth time this Company has offered this material, and each time it has been rejected. It is strongly recommended that the Hexylresorcinol Pills called for be obtained from some other source since it appears certain that Retort Pharmaceutical Company cannot manufacture an acceptable product for this particular item. Attachment. cc: New York, Inspection, Master Reading File. Mr. BROWNSON. This is a memorandum from the Chief of the Second Inspection Branch, dated February 23, 1954, notifying you that for the fourth time Food and Drug had rejected the pills under these contracts. What did you do about that? Mr. PEED. Once again, sir, that was marked to the attention of Miss Queen and no doubt went directly to her over my desk. All I can say about it is what I have just related with respect to our action in connection with declaring this company in default. It has been declared in default. Mr. BROWNSON. I understand that this particular memorandum is not in your file; is that right? Mr. PEED. I would not know; I would not recall. Mr. BROWNSON. You did take action on July 16 by sending a telegram terminating deliveries under current contracts on the basis that offerings were urgent and the delivery failures constituted a breach of contract? Mr. PEED. I believe it was the 20th that you said before. I do not have the telegram before me, but I can recall such a telegram was issued. Mr. BROWNSON. The one this year, this week? Mr. PEED. July 20; yes. Here is a copy. Mr. BROWNSON. That is the 1953 telegram. I am now talking about the current one you just sent this week. Mr. PEED. That was not a telegram, sir; that was a letter. Mr. BROWNSON. A letter? Mr. PEED. Yes. Mr. BROWNSON. Do you have a rule that applies in cases where a bid shows erasures of material quotations? Mr. PEED. Yes. There are instructions on the reverse of our standard form to the effect that erasures should be initialed, or explained by the party making the erasure. Mr. BROWNSON. I would like to ask unanimous consent that the copy of the letter of July 16, or 20, 1954, to the Retort Pharmaceutical Co., terminating their current contract, be included in the record. (The letters referred to exhibits 29A and 29B are as follows:) Reference is made to the above-cited SECONDER providing for delivery on or before October, 1952, been accomplished up to the present time, which delivery has not somring 4,080 vials of In view of the urgent need for this merchandise, and your Mr. Baowww.x ken If you will look down there, item Na i opposite "Hexylendid ad the place provided for the bid price. Mr. Pass. I' Mr. Browxx.x. I then in erasure evident there! Mr. BROWNSON. Is there any written explanation accompanying this bid explaining these erasures? Mr. PEED. No. Mr. BROWNSON. When the staff investigators examined these contract files in your office, do you recall whether they called to your attention the fact that none of the envelopes containing the bids appeared in the files and that the bids were not date stamped in any way? Mr. PEED. Yes, they did call that to my attention. Mr. BROWNSON. I believe your policy is to retain such envelopes so that you will have a record of the time each bid is received. Mr. PEED. Yes, sir. Mr. BROWNSON. How do you explain the absence of all of the envelopes in connection with these records of contracts awarded to the Retort Pharmaceutical Co.? Mr. PEED. As I told your investigators, sir, I cannot explain it. I have no explanation at all. I do not know what occurred. I do not know why the envelopes were not there. Mr. BROWNSON. I will show you, and introduce into the record as exhibit No. 23, a schedule prepared by our staff of all the bids received on the sixth Retort Pharmaceutical contract. Mr. BROWNSON. Your attention is particularly called to the bids of the two lowest bidders, Retort Pharmaceutical Co. and Sharp & Dohme. Will you read these bid figures? Mr. PEED. Under contract 16149, Retort, .142; Sharp & Dohme, .145. Mr. BROWNSON. Do you draw any conclusions from those two sets of prices at all? Does it appear peculiar to you that Sharp & Dohme consistently underbid Retort and in the case of the two major contracts were underbid by three-tenths of a cent or less? Mr. PEED. I would not attach any particular significance to that other than it would appear that this commodity is highly competitive. It would appear so to me as a purchasing officer. Mr. BROWNSON. Mr. Holtzman, do you have any questions? Mr. BROWNSON. Mr. Williams? Mr. WILLIAMS. I wonder if you could clear up this exhibit for me, No. 17. Who is that memorandum from and to whom did it go? Mr. PEED. Apparently it is to Mr. Ross, the liaison officer for EPS. Mr. WILLIAMS. What Mr. Ross is that? Mr. PEED. Mr. Bob Ross, from Mr. Hinger of the MSA. Mr. WILLIAMS. I see. I was interested. You found marks on the invitations, or on the envelopes, and you requested your staff not to make any marks. Mr. PEED. That is right. Mr. WILLIAMS. What kind of marks did you find? Mr. PEED. They would very often compute some of the bids on the face of some one bid, for example, and that to my way of thinking is not the proper thing to do. Mr. WILLIAMS. You also mentioned that in some cases contracts were let to small businesses fewer than 500 people. Mr. PEED. Yes. Mr. WILLIAMS. I got the impression you made the determination of whether any given contract could properly be awarded to a smallbusiness concern. Is that your determination? Mr. PEED. No, sir. That is the policy of the central office of the GSA. Mr. WILLIAMS. Is that where these decisions are made that it should be let to a small-business concern? Mr. PEED. It is spelled out in our manual, I believe, with respect to how that is approached and arrived at. It is in conformity with the intent of the Congress, I believe, that small business must be given an opportunity to engage, where possible, in this business, especially in distressed-labor areas. Mr. WILLIAMS. The decision is made in the GSA? Mr. PEED. That is right. Mr. WILLIAMS. Under the law and regulations? Mr. WILLIAMS. That is all I have. Mr. HOLTZMAN. In view of the policy of the GSA with respect to the letting of these awards to small business, could that possibly be the reason why, in spite of the infinitesimal difference between the bids of the Sharp & Dohme and Retort, that Retort wound up with the award? Mr. PEED. Oh, no. I do not believe that was the case in this instance at all. Mr. BROWNSON. I believe in those requests for bids Retort indicated that they had over 500 employees, which would place them in the same category as Sharp & Dolime. Mr. HOLTZMAN. No further questions. Mr. BROWNSON. This afternoon the subcommittee will hear Mr. E. L. Kuryloski, assistant to the director of field operations, Sharp & Dohme, Philadelphia; Mr. Murray Miller, vice president and treasurer, Retort |