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HEARINGS

PURSUANT TO SECTION 4,

PUBLIC LAW 86-89

SPECIAL SUBCOMMITTEE ON PROCUREMENT PRACTICES OF THE DEPARTMENT OF DEFENSE

OF THE

COMMITTEE ON ARMED SERVICES

HOUSE OF REPRESENTATIVES
EIGHTY-SIXTH CONGRESS

SECOND SESSION

HEARINGS HELD APRIL 25, 27, 28, 29; MAY 2, 3, 4, 5, 31;

JUNE 1, 3, 9, 1960

UNITED STATES
GOVERNMENT PRINTING OFFICE

WASHINGTON : 1960

55096

55 526Su 2650

11/98 31150-194

COMMITTEE ON ARMED SERVICES

CARL VINSON, Georgia, Chairman PAUL J. KILDAY, Texas

LESLIE C. ARENDS, Illinois CARL T. DURHAM, North Carolina

LEON H. GAVIN, Pennsylvania L. MENDEL RIVERS, South Carolina

WALTER NORBLAD, Oregon PHILIP J. PHILBIN, Massachusetts

JAMES E. VAN ZANDT, Pennsylvania F. EDWARD HÉBERT, Louisiana

WILLIAM H. BATES, Massachusetts ARTHUR WINSTEAD, Mississippi

WILLIAM E. HESS, Ohio MELVIN PRICE, Illinois

ALVIN E. O'KONSKI, Wisconsin 0. C. FISHER, Texas

WILLIAM G. BRAY, Indiana PORTER HARDY, JR., Virginia

BOB WILSON, California CLYDE DOYLE, California

FRANK C. OSMERS, JR., New Jersey CHARLES E. BENNETT, Florida

KATHARINE ST. GEORGE, New York RICHARD E. LANKFORD, Maryland

CHARLES S. GUBSER, California GEORGE HUDDLESTON, JR., Alabama FRANK J. BECKER, New York JAMES A. BYRNE, Pennsylvania

CHARLES E. CHAMBERLAIN, Michigan TOBY MORRIS, Oklahoma A. PAUL KITCHIN, North Carolina LEROY H. ANDERSON, Montana DANIEL B. BREWSTER, Maryland FRANK KOWALSKI, Connecticut FRED WAMPLER, Indiana SAMUEL S. STRATTON, New York JEFFERY COHELAN, California A. FERNÓS-ISERN, Puerto Rico, Resident Commissioner

SPECIAL SUBCOMMITTEE

CARL VINSON, Georgia, Chairman PAUL J. KILDAY, Texas

LESLIE C. ARENDS, Illinois L. MENDEL RIVERS, South Carolina

WILLIAM H. BATES, Massachusetts RICHARD E. LANKFORD, Maryland

WILLIAM G. BRAY, Indiana
GEORGE HUDDLESTON, JR., Alabama FRANK C. OSMERS, New Jersey
TOBY MORRIS, Oklahoma

FRANK J. BECKER, New York
JOHN J. COURTNEY, Special Counsel
WILLIAM H. SANDWEG, Assistant Counsel

II

CONTENTS

Statement of -

Page

Vinson, Carl...

1

Campbell, Hon. Joseph, Comptroller General of the United States - 404

Coggeshall, Hon. Thomas, Chairman of the Renegotiation Board... 315

Johnson, Hon. Courtney, Assistant Secretary of the Army for

Logistics

224

LeBoutillier, Hon. Philip. Deputy Assistant Secretary of Defense

(Supply and Logistics)---

143

Milne, Hon. Cecil P., Assistant Secretary of the Navy for Material--- 251
Taylor, Hon. Philip B., Assistant Secretary of the Air Force for
Material

339

Testimony on behalf of -

Air Force, Department of_

339

403

Davis, Maj. Gen. W. E., Director of Procurement and Production,

Headquarters Air Material Command, Dayton, Ohio.

Ragusin, Aaron J., Deputy for Procurement and Production, Office

of the Assistant Secretary for Material.

Taylor, Hon. Philip B., Assistant Secretary for Material.
Army, Department of_

224-250
Johnson, Hon. Courtney, Assistant Secretary for Material.
Kintisch, Emanuel, Chief of Regulations Section, Contracts

Branch, Office Deputy Chief of Staff, Logistics.
McMorrow, Brig. Gen. F. J., Director of Procurement, Office

Deputy Chief of Staff, Logistics.

Defense, Department of -

143-224

Bannerman, G. C., Director of Procurement Policy.

LeBoutillier, Hon. Philip, Deputy Assistant Secretary of Defense

(Supply and Logistics).

Phelan, John, Assistant Director of Procurement Policy.

Nash, James P., Office of General Counsel.

General Accounting Office_-

404413

Campbell, Hon. Joseph, Comptroller General.

Bailey, Charles, Assistant Chief, Defense Auditing and Contract-

ing Division.

Newman, William, Chief, Defense Auditing and Contracting Di-

vision.

Welch, J. Edward, Office of General Counsel.

Navy, Department of -

251-313

Bantz, Hon. Fred A., Under Secretary,

Jones, M. E., Assistant Director, Procurement Division.

Moore, W. H., executive assistant to Assistant Secretary of Navy,

Material.

Steger, Merritt, Deputy General Counsel.

Swart, Rear Adm. R. L., Vice Chief, Office of Naval Material.

Renegotiation Board -

315 337

Coggeshall, Hon. Thomas, Chairman.

Fensterstock, Howard, General Counsel.

Procurement:

Armed services regulations :

Section 3. Part 2—Circumstances permitting negotiations.. 22, 23

Part &Price negotiation policies and techniques -

146-15.)

Part 9/Subcontracting policies and procedures.

167-171

Section 15. Contract cost principles and procedures.

71-124

Procurement-Continued

Authority, line of, in the Departments :

Page

Air Force, Department of the---

48–51, 57, 58

Army, Department of the---

40_43, 52–54

Defense, Department of_

175

Navy, Department of the_

44–47, 54-57

Tables (net value and number of actions):

1. By type of contract pricing provision, fiscal 1959..

132

2. By type of contract pricing provision, fiscal 1951-59_-

133

3. Number by type of contract pricing provision, fiscal 1952–59.- 134

4. Formally advertised and other prime contracts, fiscal 1957–59.- 135

5. Formally advertised and other prime contracts, fiscal 1959--- 136

6. Net value by program, fiscal 1959_-

137

7. Number and net value by method, fiscal 1959.

138

8. Extent of competitive procurement, fiscal 1959-

139

DOD procurement calendar, 1959--

216

Advertised procurement.-

226–229, 405, 406, 412, see tables

Advertising---

199–201, 399_401

Auditors, negotiators, etc..

277–280, 333, 334, 350-353

Breakout. (See Government furnished equipment.)

Buyout. (See Government furnished equipment.)

Capital investment. (See Sales.)

Contracts:

Cost-plus-fixed-fee, discussion of..

221, 222, 360

Incentive, discussion of...

201-215,

237, 238, 249, 250, 288-309, 319-322, 324, 326, 353-357, 359, 360, 391–399

Results of use:
Air Force

382_391, appendix 3
Navy-

283, 284, 294, appendix 3
Redeterminable, discussion of.

247-250
Results of use, Army-

232, 233, 244–247
Types, description.

59–63, 157-166, 285–288
Value of expenditures by types. (See Tables.)

Contracting, procedure of.--

361, 362, 366, 367, appendix 3

Drawings-

256, 406

General Accounting Office:

Reports---

63-70

Recoveries -

413

Government facilities (investment), consideration, use of and return on.- 197-

199, 201, 357–359, 370, 373, 378-380

Government furnished equipment (GFE), (buyout, breakout)

234,

235, 264, 265, 271-277, 280, 281, 402, 403

Labor surplus areas. (See National emergency.)

Contract awards, statistics.--

Appendix 1

Laws:

Armed Services Procurement Act (ch. 137, T. 10, USC)---

3-7

National defense contracts (ch. 29, T. 50, USC)--

8,9

Public Law 86–89, act of July 13, 1959 (sec. 4)

2

National emergency: Declaration of as it affects procurement practices— 37, 38,

176-185, 266-271

Negotiated procurement.

195–197, 242,244, 405 409, 412, see tables

Negotiation:

ASPR.

22-23, 146–155

Discussion of process..

364373

Net worth. (See Sales.)

Pricing (ASPR).

71-124, 146-155

Profits:

Percent allowable----

309, 310

Excessive, consideration of in renegotiation-

317-319

Progress payments.-

216, 217

Renegotiation :

Process -

315-318

Status of pending cases.

335

Cases before Tax Court.

337
Reports: House Report 1688, 84th Congress, 2d session (to accompany

Page

H.R. 8710)---

11-21

Sales, net worth, capital investment, return on.-

316,

318, 321, 322, 326, 329–332, 377, 378
Small business. (See National emergency.)
Contract awards, statistics.--

Appendix 2

Training:

Air Force (AMC).

342–347

Army-

235

Navy-

257, 258

Hearings on H.R. 12299 and H.R. 12572_-

Appendix 4

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