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Of course, often the filings aren't made on time, you know. We recently settled a couple of cases where filings should have been made for the 1943 and 1944 year, in the war. And people hadn't filed with us. It came to our attention. They filed-we just closed those cases

out.

But here is the picture. The percent of completion through the 1948 to 1950 year, 100 percent; 1951, 99.9 percent of assignments made to the field for renegotiation; 1952, 99.9 percent; the 1953 year of contract completions, 99.8 percent; 1954, 98.2 percent completions of the assignments; 1955, 92.3 percent.

The 1956 year now, remember, contractors don't file until the first day of the fifth month after the close of the year. That means May 1, to begin with. They have to be examined and sent to the field.

In the 1955 year, that is, of people filing with us by May 1, 1956, they were 92.3 percent completed.

As to the 1956 filings, made May 1, and after, 1957, 77.6 percent. The 1957 year, where people filed with us at May 1, 1958, they were 40 percent completed at that time.

Mr. BECKER. I see that you are getting more current.

Mr. COGGESHALL. Some cases are very complicated.

Also, cases have to be held up at the suggestion of the Department of Justice if there are charges of fraud, or there is a question of concern to the Internal Revenue Service, in which case we have to withhold completion.

And many contractors do not file on time. We have had quite a drive to overcome this delinquency, because there is no penalty in the law except for willful failure to file.

Mr. BECKER. What are you saying, then, Mr. Coggeshall? That a lot of the burden has been on the contractors in not filing rather than on the Board in not completing their work?

Mr. COGGESHALL. We have broken that down. We found this last year that some 75 percent of these arrearages-up to a point, 75 percent were delinquencies on the part of the contractor. Then they are not always peculiarly responsive to our request for additional information, over and above filings.

Mr. BECKER. Thank you.

Mr. COGGESHALL. There is such a thing as dragging one's feet.

Mr. VINSON. Now, members of the committee, to give you a little background, here is the way-now, listen to this. This is what I said before the Ways and Means Committee, in giving them the justification.

I might go back a little bit and read this:

Price redetermination is not new. It started back in 1934, first, when we passed what is known as the Vinson-Trammell Act. Then out of the Price Readjustment Board, we passed a law creating the Renegotiation Board.

Mr. COGGESHALL. Yes, sir.

Mr. VINSON. The renegotiation officials are appointed by the President and confirmed by the Senate. And there are five or six members of it.

Now, here is the way it follows:

Four months after the closing of the fiscal or calendar year, the contractor files a statement of his renegotiated business using his own figures. After the 4month filing date, the Board is permitted 1 year in which to indicate renegotiation.

Now, you will see in his statement there was $97 billion worth of business filed before his Board, but he only renegotiated a certain amount. What is in his statement there? I forget the amount. Mr. COURTNEY. $26 billion.

Mr. VINSON. You see, it is all over $1 million.

After the 4-month filing date the Board is permitted 1 year in which to indicate renegotiation and a 2-year period thereafter within which to complete actual renegotiation.

Now, that is the way it is all operated there.

Now, I want this to be in the record positive. Here is a statement, on page 18-and I trust-I say, if there is any sensational newspaper writer here, that this is sensational news, and I trust it won't be on the back page of the periodicals and the papers of this country. Here is a witness that testified that

Specifically, for the years included in our study, the aircraft and missile contractors, using incentive contracts predominantly (66.7 percent) * * realized a profit of 71.3 percent of the total net worth.

Now, that is information that should not be on the back page of any periodical or any newspaper.

Thank you very much, Mr. Coggeshall

Mr. BATES. Now, Mr. Chairman, before the newspapers carry that, I think the witness has already testified that had another type of contract been given when so much of the plant was actually owned by the Government, the profit likewise would have been in that neighborhood.

Mr. VINSON. That is right.

Mr. COGGESHAL. It could be.

Mr. BATES. Sure. So it has absolutely no pertinence, as to the type of contract, but only the question of how much of the plant the Government owned.

Mr. VINSON. The only people who have any material assistance from the Government are those who get incentive contracts.

Mr. KILDAY. Of course, what Mr. Coggeshall said is that it could have been.

Mr. COGGESHALL. Yes.

Mr. KILDAY. But if it had been awarded on a competitive bid, a straight general advertised competitive bid, the chances that it would happen would be practically nil. Is that not true?

Mr. COGGESHALL. I would say so.

Mr. KILDAY. Certainly.

Mr. VINSON. And put this in the record. And the testimony shows the only people who get incentive contracts are those in which the Government has made a large contribution in their plants.

Thank you very much.

Now, this is a very fine hearing.

Mr. COGGESHALL. Thank you very much, Mr. Chairman and gentlemen of the subcommittee.

(Whereupon, at 11:50 a.m., the subcommittee adjourned, to reconvene at 10a.m., Wednesday, May 4, 1960.)

JOHN J. COURTNEY, Esq.,

Special Counsel,

Committee on Armed Services,

House of Representatives.

THE RENEGOTIATION BOard,
Washington, D.C., May 5, 1960.

DEAR MR. COURTNEY: Pursuant to your request, I am pleased to enclose "Statistics of petitions to the Tax Court" at March 31, 1960, for the use of the Armed Services Committee, House of Representatives.

With cordial personal greetings.

Sincerely yours,

THOMAS COGGESHALL, Chairman.

THE RENEGOTIATION BOARD STATISTICS OF PETITIONS TO THE TAX COURT AT MARCH 31, 1960

The 59 petitions at the Tax Court on March 31, 1960, represent net refunds (less State taxes) of $108,027,943. These amounts are divided between major airplane manufacturers and others as follows:

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PROCUREMENT PRACTICES IN THE DEPARTMENT OF

DEFENSE

WEDNESDAY, MAY 4, 1960

HOUSE OF REPRESENTATIVES,
COMMITTEE ON ARMED SERVICES,

SPECIAL SUBCOMMITTEE ON PROCUREMENT PRACTICES

IN THE DEPARTMENT OF DEFENSE,

Washington, D.C. The subcommittee met at 10 a.m., Hon. Carl Vinson (chairman) presiding.

Mr. VINSON. Now let the committee come to order.

This is a continuation of the hearing on the subject matter that we have been considering for the last 3 or 4 days, with reference to contracts of various kinds by the Department of Defense and the military services.

Now this morning we have the representatives of the Air Force here. And I see the first witness is the distinguished Assistant Secretary of the Air Force for Materiel, the Honorable Philip B. Taylor. Mr. Secretary, we welcome you here this morning. And you have permission to address the committee on this subject matter in any form that you desire to do so.

I see you have a prepared statement. I am sorry I didn't have the opportunity to read it before this morning. So I may not have as many questions to ask you as if I had had the privilege of reading it last night.

First, we will start off with your statement this morning. Go right ahead, now, Mr. Secretary.

Secretary TAYLOR. Thank you, sir.

(A biographical sketch of the witness follows:)

Philip B. Taylor was nominated by President Eisenhower to be Assistant Secretary of the Air Force for Materiel on March 9, 1959. His nomination was confirmed by the Senate April 13, 1959, and he was sworn into office April 16, 1959.

Mr. Taylor was born in New York City on March 7, 1899. He was graduated from the Sheffield Scientific School, Yale University, in 1920, with the degree of Ph. B. in mechanical engineering.

He entered the employ of the Wright Aeronautical Corp. in June 1922 and served as chief engineer of the corporation from 1930 to 1940.

During the war years he served as vice president and acting general manager. In 1945, Mr. Taylor formed the Taylor Turbine Corp. and obtained the exclusive right to sell and manufacture the current Rolls-Royce turbojet engine in the United States. After the sale of this license to Pratt & Whitney, Mr. Taylor became a partner in the engineering and construction firm of Sanderson & Porter.

In October 1948, Mr. Taylor was appointed Chairman of the Aircraft Propulsive Systems Panel of the Committee on Aeronautics of the Research and Development Board of the National Military Establishment.

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