figure. We can break out for you the actual changes in each contract, however, since many of the contracts may have had a large number of changes, to do so would take us no less than 1 month. We will do this job if you feel that it is necessary, however, we are hopeful that the information already presented in the light of this clarification will be adequate for your needs.

3. The attached supplementary information indicates the date of commencement of each of the contracts listed both under letter contract and/or a definitive contract. Time does not permit us to again review these contracts and furnish the final settlement date, however, all of the contracts listed were settled during the period from January 1, 1957, to June 30, 1959. If you require the specific dates of settlement of each contract, further research of each of the contract files is necessary.

4. In each instance, performance of change orders is mandatory under the terms of the contracts. While language in the contracts permits us to unilaterally require a change, as a practical matter, this very rarely occurs and the changes are mutually agreed upon between the Air Force and the contractor. 5. In most instances, letter contracts preceded the definitive contracts. The details in each case are set forth in the supplementary attachment.

6. It is impossible within a reasonable period of time to withdraw from files throughout the country the contracts that preceded the contracts listed in the summary to determine whether they were cost-plus-fixed-fee contracts and in the event that they were, to provide the requested information. If you desire. we will do so and can have it in approximately 5 weeks. I would like to indicate that in almost every instance where the incentive-type contract is utilized, it has been preceded by a cost-type contract since the incentive contract is not used until sufficient information has been gathered to negotiate, a reasonable target price. Our experience indicates that in cost-type contracts, costs actually incurred by the contractors and reimbursed by the Government are greater than the estimated costs initially negotiated. This cost overrun, in a recent summary of 171 CPFF contracts, amounted to an average of 18 percent. In addition, in a study made of CPFF contracts in 1958, data showed that final fee rates were generally less than the rates originally negotiated. This meant that final costs on these contracts generally exceeded the costs originally estimated and placed on contract even though fee dollars remained the same.

7. The services do exchange pricing information. Overhead negotiations and aircraft manufacturers and missile manufacturers planning reports data are the most prominent examples, Overhead negotiation responsibility is estab lished among the services for contractors with whom they all do business. Cognizance is established for one service for a given contractor to eliminate duplication. Summaries of each negotiation are conveyed by the cognizant service to users of all services, generally on an annual basis. The joint services aeronautical manufacturers planning reports system and the missile manufacturers planning reports system are exchanges of interservice data which is geared to calendar quarters and is disseminated to the Army, Navy, and Air Force after clearing through the Air Force's Air Materiel Command. In addition to these more formal methods, the services informally sometimes interchange information in the infrequent examples where more than one service buys the same item such as helicopters (Air Force and Navy). Since the exchange is informal we don't have records showing the extent to which this kind of exchange is accomplished. We believe these exchanges are mutually beneficial but we have no efficient method of measuring their effectiveness.

On page 15 of the data relative to armed services procurement matters which was prepared by the committee and used at the hearings, you have very briefly summarized a report of 14 selected Air Force contracts and subcontracts originally submitted by the General Accounting Office. In the summary you do not indicate any recovery on the part of the Air Force. To supplement the record I have attached as exhibit B the recoveries that have been made in these cases. You will note that the total recoveries made by the Government exceed the specific amounts identified by the General Accounting Office as due to the Government.

I recognize that this information is not completely responsive to your request, however, we will be responsive in the exact terms of the request if additional time can be provided. Please advise me whether the information submitted is satisfactory or if you desire to have us research the additional points.

Sincerely,

AARON J. RACUSIN, Deputy for Procurement and Production.