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There are instances where we do not have the whiphand as in the case of procurement of automobiles.
Senator RIBICOFF. Do you think sound business practice should be based on who has the whiphand on any given item at any given moment?
Mr. ABERSTELLER. I am not suggesting it is sound business practice, Mr. Chairman, but I believe that is generally the way the business is conducted.
Senator RIBICOFF. Do you think business as a whole in the United States is conducted on who has the whiphand in any given circumstances?
Mr. ABERSFELLER. Well, it may be an improper choice of the word. Let me put it this way. I think that those who buy larger quantities of goods are in a position to obtain more attractive prices than those who obtain a lesser quantity of goods.
We use this philosophy in a reverse sort of way in our procurement if in fact we are a volume procurer, 40 percent of whatever a company produces.
Senator RIBICOFF. What do you think the automobile companies are selling comparable automobiles to Hertz and Avis for?
Mr. ABERSFELLER. I do not know, Mr. Chairman, I would be speculating. I just do not know.
Senator RIBICOFT. Do you think they are paying any more than
RELATIONSHIP OF PRICE TO COST
Even if the manufacturers did bid on our procurements and did furnish the desired information we seriously question its usefulness for the purposes intended. First, the bill as now written requests information as to the "unit price” of the safety features rather than their cost. The price any manufacturer might wish to set on any component of the vehicle need not bear any relationship to its cost.
Secondly, even if the price given bore such a relationship, the prices offered to the Government, in all probability, would not reflect those offered in sales to the public since many costs, such as advertising and sales promotion would not be included in the Government prices.
LACK OF ENFORCEMENT MECHANISM IN BILL CITED
We must also point out that there is some question in our minds as to our ability to enforce the requirements of the bill, even if the manufacturers were willing to bid on our invitations. The bill as written does not provide any specific enforcement mechanism although, implicitly, a failure or refusal to furnish the required information would require the rejection of any bid or offer. It is probable that even without specific enforcement procedures we could, by regulation, provide that bids would be rejected for failure to submit the required information.
However, we would not be able to establish a procedure, under which we could reject bids if the prices specified for safety items were believed to be unrealistic or inaccurate. We could easily be faced with the anomalous situation of rejecting as nonresponsive a bid on the one hand which did not furnish any data, while accepting a bid at a higher overall price from a bidder whose prices for safety features were considered to be inaccurate or unusable for the purposes intended.
We do not believe that this result would be in the best interests of the Government or the public.
We are also of the view that there are at least two alternatives to the proposed legislation which can be used to obtain, more economically and accurately, the information sought.
The first of these involves the use of the facilities of the Bureau of Labor Statistics. As you know, among the responsibilities of the Bureau, is the compilation of data needed to construct various price indexes. In this connection, program data are periodically obtained regarding price changes of motor vehicles.
POTENTIAL TO USE DATA BLS ALREADY HAS
A Bureau press release of November 29, 1967, for example, reported an average price increase in 1968 model cars of $87.54. Of this, the Bureau concluded that $29.65 was attributable to safety improvements. Although the data released by the Bureau were not broken down by individual manufacturer, it would seem that the potential for their use should be fully explored.
The second alternative would be to amend the Automobile Information Disclosure Act, Public Law 85–506. Under this law manufacturers of new automobiles are required to affix labels to each vehicle which indicate, among other things, the suggested retail price for the vehicle and each accessory or item of optional equipment which was attached to the vehicle at the time of delivery.
This law could be amended to require that the prices of safety feature also be shown. This approach to the problem would in our view provide a far more accurate indicator of consumer prices than could be provided under the proposed legislation.
This concludes my prepared statement. Mr. Chairman, I have with me today, on my immediate right, Mr. George W. Ritter, the Assistant Commissioner for Standards and Quality control, and on his right, Mr. Peter M. Mollica, assistant general counsel for Procurement. If you or members of your committee have any questions you wish to ask, we shall be pleased to attempt to answer them at this time or to furnish any additional information available to us.
Senator RIBICOFF. On page 9 you point out that the Bureau concluded that $29.65 is attributable to safety improvement. How does that comply with this element of confidentiality that the BLS is supposed to have with the automobile manufacturers?
Mr. ABERSTELLER. These I understand were composite averages, Mr. Chairman. I simply have a copy of their press release and that information that I have quoted is from that press release.
WITNESS SAYS PUBLIC SHOULD KNOW PRICE DATA
Senator RIBICOFF. Do you think the Government and the public are entitled to know what the price of safety standards amounts to?
Mr. ABERSFELLER. Yes.
Senator RIBICOFF. You do think they are entitled to know. From your experience as a procurement officer do you believe the industry has the ability to make this information available ?
ABILITY OF COMPANIES TO PROVIDE DATA
Mr. ABERSFELLER. Well, I think in this particular case we need not rely on my experience but rather the responses we received as a result of our letter in 1966 to the industry.
One company did in fact offer some information, did tell us what the costs on some of the safety standard items were. Another company made an effort to present it in another way much like the Bureau of Labor Statistics presents in terms of the value you really had for the car. And the other two in essence said that this was confidential information and was not to be released.
Senator RIBICOFF. Where do you believe the responsibility exists in the Government for obtaining that information?
Mr. ABERSFELLER. You are referring now, Mr. Chairman, to the specific value
Senator RIBICOFF. Yes.
Senator RIBICOFF. Where in the Government should the responsibility be centered ?
Mr. ABERSFELLER. I would favor an amendment to the Automobile Information Disclosure Act.
Senator RIBICOFF. To put that on as an added feature?
Senator RIBICOFF. Now, the correspondence that you talked about before concerning cost, will you make that available for the record ?
Mr. ABERSFELLER. Yes, sir, indeed, I will be pleased to.
(The information to be furnished by Mr. Abersfeller for inclusion in the record follows:)
MAY 6, 1966. Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, U.S. Senate, Washington, D.C.
DEAR MR. CHAIRMAN : In connection with hearings held by your Committee on S. 3005 the witness for the General Services Administration, Mr. H. A. Abersfeller, Commissioner of Federal Supply Service, testified March 17, 1966, concerning the role of GSA in the field of automotive safety.
During the course of his testimony he was requested to obtain and provide for the record information regarding any increased motor vehicle cost which might be caused by inclusion of the several devices contained in Federal Standard 515, Standard Safety Devices for Automotive Vehicles, established by GSA pursuant to the provisions of Public Law 88–515.
Accordingly, the desired data was requested from the major domestic automobile manufacturers and transmitted herewith for the information of your Committee are copies of responses which we received from General Motors Corporation, Ford Motor Company, Chrysler Corporation, and American Motors Corporation regarding this matter. Sincerely yours,
J. E. MOODY, Acting Administrator.
FORD MOTOR Co.,
Dearborn, Mich., April 11, 1966. Mr. H. A. ABERSFELLER, Commissioner, Federal Supply Service, General Services Administration, Washington, D.C.
DEAR MR. ABERSFELLER: In your letter of March 25 to Mr. Arjay Miller, you requested information as to the effect on vehicle costs of the several design and equipment changes required on 1967-model vehicles by the General Services Administration.
As you know, the Ford Motor Company made most of these items standard equipment on its 1966 models, and the addition of these items has been reflected in the pricing of those models. Also, our previous vehicles had met and continue to meet certain of the GSA standards without any design or equipment changes.
Because the process of vehicle pricing is complex and recognizes a great number of factors in addition to design and equipment changes, it is not practical to view "product" or "design" changes alone in the evaluation of price changes made on any one model, or even on an average vehicle. Other factors, such as labor and material cost changes, necessary increases in facility investment, and competitive circumstances, were considered and influenced the price established for each model.
One type of comparison that can be made of the vehicle prices in the two model years is on a comparably-equipped basis, using 1965 option prices to adjust basic vehicle prices in those instances where a difference exists in vehicle equipment. On this basis, the prices of most 1966-model Ford vehicles decreased from 1965model price levels, even though labor, material, and other costs increased. (This decrease was in addition to the decrease in prices resulting from the change in excise tax rates that was passed on in full when it became effective.) Naturally, the exact amount of the price reduction varies from model to model, but the schedule attached shows the method used in developing the amount of the adjusted price difference on a typical model, a Galaxie 500 four-door sedan.
As you will see, the 1966-model Galaxie four-door sedan, with a suggested retail ("label") price of $2,676.82, costs $14.26 less than the comparably-equipped 1965 model (both at the 7% excise tax level); furthermore, the lower price of the 1966 model includes certain GSA requirements not included at options in the prior year, and some additional design changes for safety purposes beyond the requirements established by GSA for 1967.
We hope the attached material will be of assistance to the Senate Commerce
John S. BUGAS,
Ford Galaxie 500 4-door, 6-cylinder sedan—1966 r8. 1965 suggested retail price
* 18. 60 Padded visors.--.
15. 70 Outside rear-view mirror.
13. 50 Rear-seatbelts
* 15. 10 Backup lights
Standard Windshield washer_
16. 85 Emergency flasher-
* 19. 60
Safety glazing—thicker laminate windshield.
Adjusted 1965 retail price (10-percent excise tax)
2, 747. 35
Adjusted 1965 retail price (7-percent excise tax). Less: Price decrease.
(14. 26 )
1966 model-bare vehicle suggested retail price (7-percent excise tax) -- 2, 676. 82
11965 option price.
GENERAL MOTORS CORP.,
Detroit, March 31, 1966. Mr. H. A. ABERSFELLER, Commissioner, General Services Administration, Washington, D.C.
DEAR MR. ABERSFELLER: This is in reply to your letter of March 23, 1966, which requests General Motors “statement of increased vehicle cost, if any, caused by each of the 17 devices or designs required by Federal Standard No. 515 for the 1967 model series of vehicles." Based upon a review of the Committee proceedings we have assumed that "cost" means cost to the customer and the amounts that follow are on this basis, in other words, in terms of Suggested List Price excluding Excise Tax.
The 1966 model General Motors passenger cars have, as standard equipment, 14 or all but 3 of the 17 items listed in Federal Standard No. 515. Many of the 14 items that are standard on our 1966 models were added a number of years ago—at different times on different models.
Last year, prior to new model introduction, General Motors announced that, in addition to the use of improved penetration resistant windshield glass, the following six items would be standard equipment on all 1966 models. Also listed