Another one billed February 1, 1977, for $2,170, payment was received March 16. One billed December 30, 1976,

Senator PACKWOOD. When you talk with them about these delays, what do they say?

Mr. CASADY. The papers have been forwarded to another regional center. I can send the papers to Portland and I might get a check out of San Francisco, or I might get a check out of Denver.

Senator PACKWOOD. And they say this is just the normal delay time; they can't do anything about it?

Mr. CASADY. This is the normal delay, just the amount of time that it takes them to process the paper. When someone comes into the office for equipment or service, they have already received authorization from their prosthetics officer. They have a form in their hand. All I have to do is sign the bottom of it and then they sign the bottom of it.

That one was billed out December 30, payment was received March 16. Another one for $1,795, payment received September 7. Another one that was billed out on May 24, was received July 21. That was for almost $1,800.

My classic one is one that's been going, for $245, since April 26. Senator PACKWOOD. What is that for?

Mr. CASADY. That was for return authorization and freight bill and repainting of a unit that an individual got and didn't like, so he sent it back. I have got to prepay all this with VA regulations. I've got 7 days to pay with ICC regulations. I don't want interest payments. My employees want their payroll.

Senator PACKWOOD. You want your money.

Mr. CASADY. Yes. This year we are probably going to gross about $80,000. Probably close to $30,000 of this is going to be with the Veterans' Administration. It's just to the place where it is hard to keep the doors open year after year when the Government has your money tied up for anywhere from 45-this one that's still out now is going on to 120 days. It's extremely hard.

I like doing business with the Government, you know. They're a nice client most of the time, except when it comes to paying. Thank you.

Senator PACK WOOD. That's the bottom line.

Mr. CASADY. That's the bottom line.

Senator PACKWOOD. Thank you for waiting so patiently. I appreciate it.

Dave Newton.

Mr. NEWTON. That's me.

Senator PACKWOOD. Is that you?

Mr. NEWTON. That's me.

STATEMENT OF DAVE NEWTON, OWNER, DAVE NEWTON

DUPLICATOR CO., PORTLAND, OREG.

Mr. NEWTON. I am Dave Newton. I own a small business here, Dave Newton Duplicator Co., Couch Street. I am past president of the Oregon Office Machine Dealers Association, chairman of the AntiMonopoly Committee of the Western Office Machine Dealers Association.

I was here earlier this morning for a portion of the meeting. I had to go off to attend to certain business details. But what I heard while here rings a bell because it relates to problems of the independent office machine dealer.

I heard that there is a problem in paperwork related to Government business that increases the cost of doing business with the Government to the point that many business people prefer not to do business with the Government. I heard also that enormous numbers of business people have declared positively and loudly that they do not want to do business with the Government, that it's not worth the hassle.

I can say that in my experience most independent office machine dealers fit in the above categories. Most of us do not want to do business with the Federal Government. Now, in itself this presents no apparent problem. So we don't do business with the Government; there still is the private sector of the economy, but this is where the rub

comes.

As more and more of us decline the opportunity to do business with Government, the more Government turns to fewer vendors and to nationally operated companies. We find then that Government purchases are the beginning of monopoly in industry. This monopoly quickly extends itself to the private sector. The independent office machine dealer thus finds himself out of business altogether.

For example, in 1964 the U.S. Government bought 64 percent of its typewriters from one company. In that same year 96 percent of the dollars spent by the Federal Government on copiers, office copiers, went to one company. Both of these companies are huge outfits, receiving enormous Government contracts in other areas of their business. Both of them are completely vertical in organization. They market their products only through their own branch offices. This trend is increasing. I don't have the figures for the copier company for 1976, but it certainly can't go much higher than 96 percent.

The typewriter company moved their market share up from 64 percent to 86 percent. As of this time this typewriter company is the only manufacturer of standard electric_office typewriters in the United States; all others have gone under. I think we can attribute these failures largely to the favoritism shown to the one remaining manufacturer.

Now, what I'm saying, and this pertains to this hearing, is that it is not only easier for large vertically organized companies to cope with Federal Government paperwork, and I should add here, if I may, and slow payment, but it actually behooves these companies to encourage such growth in paperwork by the Government. What is happening is that a problem that is basically seen as simply redundant paperwork is in fact destroying the bulwark of the American free enterprise system, the small independent businessman.

Senator PACKWOOD. You're right. You know what bothers me? The major large companies in this country are no longer the really risktaking innovators. They are basically conservative companies, and it is only when a few people can get together and they are willing to risk $5,000 or $6,000 apiece, and they may lose it, that you find new challenging ideas coming along.

We are going to squeeze that right out of them, if we keep going the way we are going.

Mr. NEWTON. I thank you for the opportunity of being here though. Senator PACKWOOD. I thank you for coming.

Now Lewis Hallmark. I saw him come in the room here.

Good morning.

Mr. HALLMARK, Hello, Senator.

Senator PACKWOOD. Good morning.

STATEMENT OF LEWIS HALLMARK, VICE PRESIDENT, BINGHAMWILLAMETTE NUCLEAR SALES & ENGINEERING, PORTLAND,

OREG.

Mr. HALLMARK. I am vice president of Bingham-Willamette Co. I am particularly interested in nuclear activity. We are not a small business. Most of our business, however, is non-Government. We find the paperwork associated with Government business to be more complex, more costly and, frankly, it seems to be a growing thing.

Normally we have had quite good relationships in terms of progress payments once the schedule is in place; however, these usually only restore to us about, oh, probably 80 percent of our out-of-pocket cost. There is a lag time of 30 or 45 days that is unavoidable, so it does cost quite a bit to carry that kind of a thing on the books.

Second, we participate in contracts that are renegotiable, usually renegotiable downward only, I might add, after a competitive bid. [Laughter.]

And these completely disallow the cost of any interest. In other words, when our proposal is audited, before we are selected as a vendor, the DCAA has full access to our accounting records and they suspend anything that we actually pay as interest to the bank.

The current job I have presented in writing we have had half a million dollars in final payment that's been outstanding in the range of 6 months, or will be 6 months by the time I forecast payment. Most of this represents out-of-pocket moneys and it definitely takes the job from a marginal profit job to one that could probably be calculated as a loser strictly on the basis of interest payment.

We have another job, rather small but typical in some respects, in which our performance was good enough to warrant about a $50,000 cost reduction or contract reduction to the Government. Our reward for that seems to be waiting for the final progress payment until after audits can be scheduled, consummated, exchanged between Government agencies, and then we will get the balance of our progress payments, plus the profit that we earned on the job.

This is another example of payment delays tending to make business with the Government undesirable and causes us to question further participation.

Senator PACKWOOD. Thank you.

Mr. HALLMARK. Thank you.

Senator PACK WOOD. Appreciate your coming.

[The prepared statement and attachments of Mr. Hallmark follow:]

We believe your proposal to require the U. S. Government
to pay interest for invoices not paid within 30 days is
a very constructive step toward equity. It should con-
tribute to solidifying this requirement in private industry
as well.

It

Generally speaking, we have received payment within 30
days for invoices representing established progress pay-
ments or pre-arranged payment schedules. Conversely,
we have had a very poor experience in receiving retained
percentages and in the final resolution of contracts.
appears that too many separate groups with divergent
regulations and objectives are involved and that there
is no willingness to place timely payment of the contractor
ahead of the resolution of the several group actions.

This is particularly distressing to us in that many of
our contracts involve a provision for renegotiation and
preclude the inclusion of interest as a cost. Terms
very often involve progress payments at 70% of our costs
with profits targeted at 10% thus forcing us to provide
20% of the costs interest free even though we must borrow
the funds to service the contract.

Highlights of a recent example:

Knolls Atomic Power Laboratory placed thier P.0. NPD-73-2011-UL with us during December, 1973. The contract ranged just over $2,000,000 with an option open to the Government to order a second unit. This option was exercised nine months later during August, 1974.

Subsequently, we were advised that KAPL could not provide
full liquidation of the initial contract 30 days after
shipment that exercise of the option made it necessary
to keep the retained percentage on the first unit delivered
until the optional unit was also delivered and the total
contract thus completed!

With the exception of an accessory item that was to remain in our plant only because by happenstance we had another contract with a separate agency that this part had to be mated with, the original contract requirements were shipped complete November 1, 1976.

We did negotiate some concession in this area relative to the percentage that was retained.

Shipment of the second unit was effected March 23, 1977, some 5 months after the original unit.

Under date of March 22, 1977, we provided the required
Form DD633-6 attesting to the fact that our costs exceeded
the estimated cost by a substantial margin and therefore
the ceiling price would apply.

We also presented our Invoice No. C-3-8 in the amount of $532,617.56.

To date the change order that must be processed prior to the invoice being honored has not been processed nor have we received any further payment.

A problem in transferring the part remaining in our yard from one agency to another has now been completed. This is an action independent of our control as was the design changes that caused the part to lag delivery of the original unit.

A minor testing deficiency has been discovered that applies to both the original unit and the optional unit. We believe resolution will be approval of a deviation as the functionality is not affected.

We have offered to accept retainage of $50,000 to cover these items or to post a bond if it would assist in getting our final payment. Per telephone advice D.C.A.A. auditors have at least verbally confirmed that our costs have been audited well over target thus justifying the ceiling price. We understand that D.C.A.A. is attempting to find a spot in their schedule that would permit them to supplement their audit of our books with an audit of our home office books in South San Francisco, but that this has not yet been scheduled. From our point of view KAPL and the Naval authorities that control KAPL were obligated to honor our invoice within 30 days regardless of whether or not they elected to have an audit performed.