Page images
PDF
EPUB

And in the redetermination meeting, redetermination of prices, recognition is given to all these changes. The result is

Mr. CUNNINGHAM. Is that true in all negotiations you have with the Government?

Mr. GORDON. I think this particular contract demonstrates that fact. There was continuous reduction in prices by redetermination.

Mr. CUNNINGHAM. Now, then, my question goes back to this item. of $1,700,000 that the gentleman from South Carolina was talking about. Up in Iowa we don't have figures like that, like we do in South Carolina.

What did you contemplate or what did the Air Force understand, if you can tell me, your right was in regard to making a profit out of efficiency? That was really taken into consideration; wasn't it? Mr. GORDON. Yes, sir.

Mr. CUNNINGHAM. Now this $1,700,000: Was that extra because of efficient management and work on the part of the General Motors, rather than a reduction in price to you or cost to you of certain articles? Mr. GORDON. We don't agree with the analysis of that $1,700,000 that has been made at any time.

Mr. CUNNINGHAM. You don't agree there was such a profit?

Mr. GORDON. We don't consider that as an item of profit, no.
Mr. CUNNINGHAM. What do you consider it as?

Mr. GORDON. The statement has been made that that is alleged overstatement of the bill of materials.

Mr. CUNNINGHAM. Now, I beg your pardon. I realize that that is a question at issue. It has not yet been determined that you

excess profit at all?

Mr. GORDON. Yes, sir.

Mr. CUNNINGHAM. That is only a charge.

Mr. GORDON. That is correct.

made any

Mr. CUNNINGHAM. There is no finding of fact. I appreciate that. Mr. GORDON. That is right.

Mr. CUNNINGHAM. But if there is any such item in there, if it should develop that there is $1,700,000 or any portion of it, would you say that that is a result of efficiency on your part and according to the original ground rules was legally and morally yours?

Mr. GORDON. I think you better refer that to your counsel.

I don't see it quite on that basis.

Mr. POWER. I don't think you can segregate the item that way. Mr. CUNNINGHAM. But it is segregated in the statement here.

Mr. POWER. It is segregated on the basis of some calculations. They were referring at the time to estimated costs. That bill of material went in originally after prices had been proposed. And the initial submission-they had all material that they needed to check those. There was a difference between the parties, of course, as to what the proposed prices were. But then they were asked to submit another some additional data and they submitted that data.

In the course of the letter of transmittal, the statement was made, "These are firm prices subject to purchase orders."

Now that statement of firm prices

Mr. CUNNINGHAM. You are talking about as fixed prices and not actual prices?

Mr. POWER. That is right, in the letter of transmittal. That term, I think, was misinterpreted. I don't believe it was misinterpreted by the Air Force, but I think the General Accounting Office misinterpreted it. They paid no attention to the exhibits attached which set forth these particular items and said, "Estimated costs."

Now we see no basis for pulling that $1,700,000 out that way. We don't agree with it, as being a proper segregated item in here.

Mr. CUNNINGHAM. That answers my question, Mr. Chairman. I have just one short one here. In another place you say, Mr. Gordon: The Air Force representatives presumably had the benefit of information with respect to the contract prices being paid by the Government to the primary source contractor for the F-84F airplane.

You have any knowledge of your own, actual knowledge, as to whether or not that is true? You base it on a presumption only? Mr. GORDON. That is right.

Mr. CUNNINGHAM. On what do you base that presumption?

Mr. GORDON. The primary contractor, the design contractor, of course, was in a program involving the production of this same airplane simultaneously with BOP. We think it is only natural that the negotiators would have access and make some comparisons between, let's say, the competitive pricing position of Republic and General Motors on the same airplane.

Mr. CUNNINGHAM. Your statement, is your conclusion based upon what would normally happen in the course of trade, is that correct? Mr. GORDON. Yes, entirely.

Mr. CUNNINGHAM. That is all, Mr. Chairman.

Mr. HÉBERT. The committee will stand in recess

Mr. BATES. Mr. Chairman. I just want to get on the record in case I read the record later on and might have to prove I was here today.

I used to play end in college, but once in a while I used to get a ball thrown at me.

I won't take much time, Mr. Chairman, just long enough to get on the record.

Mr. HÉBERT. Will you be back this afternoon?

Mr. BATES. Yes, I will be back. That is the reason I will make it very short here.

We have been talking quite a bit about percent of profit. I never get particularly disturbed about percents because you don't pay bills with percentages. You pay bills with dollars.

I used to run some retail stores at one time where I had a branch manager who was always very happy when he had a high percent, but he was losing dollars, if you understand what I mean.

Mr. GORDON. Yes, I do.

Mr. BATES. Now relating that to this, if you had a manufacturer who produced, say, at $400,000 a unit, and he had a low percent of profit, and on the other hand you had a fellow that put out the same item for $350,000 at a higher percent of profit, and applying this to the Government, what would be better for the Government, to pay a higher percentage and get the thing a lot cheaper or vice versa?

Mr. GORDON. Well, I think you have almost answered your own question.

Mr. BATES. Of course, it answers itself, doesn't it?

Mr. GORDON. Yes.

Mr. BATES. So we must be concerned about the dollars involved in

these things.

Mr. GORDON. That is right.

Mr. BATES. I would like to get into that matter later on today.
Now, who was the primary source for this plane?

Mr. GORDON. Republic Aircraft.

Mr. BATES. And what was their margin of percent compared with your 11 percent? Do you have those figures?

Mr. GORDON. I don't know. I have no figures. I have no figures as to what their costs or percentage of profit or return on investment or anything else was.

Mr. BATES. Do we have those?

Mr. GORDON. I am sure those figures are in the hands of this committee, though, through the investigations that they have pursued. Mr. COURTNEY. They are in the published book.

Mr. BATES. Yes. Does counsel know what they were?

Mr. COURTNEY. Offhand, I don't recall them. I think there were 5 contracts, or 6 contracts reported over a period of time. Of course, the profit rate as reported varied between the two.

Mr. GAVIN. Would the gentleman yield at that point? Do you recall the unit cost?

Mr. COURTNEY. Again, that varied in the different contracts. I can supply the information.

Mr. BATES. I do think for comparative purposes we should put it in

the record.

Mr. COURTNEY. We have it.

Mr. BATES. Mr. Chairman, in view of the fact we are meeting this afternoon, I will yield back my time.

Mr. HÉBERT. The committee will stand in recess until 2 o'clock this afternoon.

Mr. RIVERS. Mr. Chairman, I will not be back. I can't be back. (Whereupon, at 12:15 p. m., the subcommittee recessed to reconvene at 2 p. m. of the same day.)

(The supplemental material attached to the statement of Mr. Gordon is as follows:)

EXHIBIT A.—The principal delivery schedule changes and the actual aircraft deliveries, contract No. AF 33(038)-18503

[blocks in formation]

Per Cumu

Final

Per Cumu- Per Cumu

Per Cumu- Per CumuPer Cumu- Per Cumu- Per Cumu- Per Cumu-l Per Cumumonth lative month lative month lative month lative month lative month lative month lative month lative month lative month lative

[merged small][merged small][merged small][merged small][merged small][merged small][subsumed][merged small][merged small][merged small][merged small][subsumed][merged small][merged small][merged small][merged small][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][subsumed][merged small][merged small][merged small][subsumed][merged small][subsumed][merged small][subsumed][merged small][subsumed][merged small][subsumed][merged small][subsumed][merged small][subsumed][merged small][subsumed][merged small][subsumed][subsumed][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][subsumed][merged small][merged small][subsumed][merged small][subsumed][merged small][subsumed][merged small][merged small][subsumed][merged small][subsumed][merged small][merged small][merged small][subsumed][merged small][subsumed][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][subsumed][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][subsumed][merged small][merged small][merged small][merged small][subsumed][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][ocr errors][merged small][merged small][merged small][merged small][subsumed][subsumed][subsumed][merged small][subsumed][ocr errors][merged small][subsumed][subsumed][subsumed][merged small][merged small][merged small][subsumed][ocr errors][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small][merged small]

EXHIBIT A. The principal delivery schedule changes and the actual aircraft deliveries, contract No. AF 33(038)-18503—Continued

[blocks in formation]

Per Cumu- Per Cumu

[blocks in formation]

Per Cumu

Per Cumu- Per Cumu

Per Cumu

[blocks in formation]

Per Cumu- Per Cumu- Per

Final

Cumu

Per Cumumonth lative month lative month lative month lative month lative month lative month lative month lative month lative month lative

[blocks in formation]
« PreviousContinue »