The CHAIRMAN. Mrs. Hort, when you failed to get answers to those letters-I assume that those letters were routine?

Mrs. HORT. Yes, sir; they were.

The CHAIRMAN. You sent out routine letters advising him of the deviations and the resulting savings that the Government was entitled to recoup?

Mrs. HORT. Not quite. In the letters I didn't say there was so much to recoup. I was trying to get the figures from him. He was entitled to that much that we would ask him to submit his figures even though we had figures of the other two contracts.

The CHAIRMAN. In other words, you were calling on the contractor to give an accounting of the savings that had accrued by reason of the deviations that had been granted?

Mrs. HORT. Yes, sir.

The CHAIRMAN. On those letters, in this instance, on these two contracts of Harry Lev, you got answers?

Mrs. HORT. That is right.

The CHAIRMAN. Then what did you do?

Mrs. HORT. I wrote him this letter saying if I did not get an answer we would assume that the Government's figures of four-some-odd cents per unit would be taken as the correct figure.

In other words, if he has any objections to it, please let us know; if not, we will take this as his consent. I believe it was a registered letter.

The CHAIRMAN. Did you get any reply to that letter?

Mrs. HORT. Not that I can recall, sir.

The CHAIRMAN. Then what happened to the amount that the Government was entitled to recover?

Mrs. HORT. I remember putting through modifications on it patterned exactly on the other two that had gone through, which were on the same procurement and which by rights should have been exactly word for word copies of each other, except for names. I mean, they are routine things, the modifications forms.

The CHAIRMAN. In other words, you undertook to process the claim or the item up to higher authority in your organization so that they could handle it?

Mrs. HORT. Yes, sir; I was supposed to write up the request for modification.

It was supposed to be up to the contracting officer. The contracting officer in turn is supposed to send it to the procurement officer, and the procurement officer gives his final O. K. and sends it up to Legal and Legal would either approve or put it through direct to the contract modification branch or if they had any objection they would send it back stating where we made a mistake or something.

The CHAIRMAN. After you had processed this, do you know what action was taken on these two contracts to recover the money?

up

Mrs. HORT. So far as I know the money has not been recovered. The CHAIRMAN. I did not understand you.

Mrs. HORT. As far as I know, it has not been recovered; it was not to the time I left.

The CHAIRMAN. What action was taken by your superiors after you had certified to them that this money was entitled to be recovered? What did they do?

Mrs. HORT. They tried to convince me that this deviation had actually been something that had been discussed-these were negotiated contracts, pardon me-that prior to the awarding of the contract had been discussed with them that there was an error in the specifications and that actually it should say 2 caps per box and not 1 and naturally that is how it would be.

However, there was no record in the procurement file on it, sir. It could very well have happened.

However, it should have been documented.

The CHAIRMAN. It was not documented?

Mrs. HORT. No, it wasn't.

The CHAIRMAN. The contract called for 1 hat in 1 box?

Mrs. HORT. It did, under the exceptions to the invitation or the The CHAIRMAN. Was this request for deviation after the contract had been made?

Mrs. HORT. Yes.

The CHAIRMAN. The file reflected that?

Mrs. HORT. When I brought up that point, if they had all been told they could do it, why did they write letters afterward. I was told that just to keep it on record and not to have trouble with inspection because the inspector naturally reads the specifications and the man's adherence to the contract.

If he has a spec in his hands and it says packed 1 to a box, he will not approve a shipment having 2 to a box since it is a deviation.

The CHAIRMAN. Since you got no reply from your letters, where did you get the information and from whom, that it was contended they had been told they could do this prior to the time the contract had been entered into?

Mrs. HORT. I don't remember, sir. It may have been Mr. O'Shiver in Mr. Truman's office. He would be the one to bounce the request back to me.

The CHAIRMAN. In other words, you did not get that information from Harry Lev or his company?

Mrs. HORT. What information? I didn't get the information as to the amount of money involved. I didn't get the information from him to let it lie.

The CHAIRMAN. What I mean is that you did not get any replies to your letters, and therefore, your contention did not come to you from the contractors that they had been told prior to the contract that they could make this deviation.

Mrs. HORT. I don't know. It is possible that they may have, sir. What do you mean? We have always packed 2 to a box instead of 1, for years.

This I don't remember specifically on any occasion, but I believe that the other contractors involved who were assessed did say so. I am quite sure that Ideal Uniform & Cap did do that. He was local and he called up. I think he said it was a very unfair thing that he had been charged back this money.

The CHAIRMAN. You mean Mr. Lev?

Mrs. HORT. NO, Ideal Uniform Cap, not Mid-City, which was the contract on which the modification was put through and on which the contractor was assessed the amount of the savings. He called up and said he thought it was very unfair, that he had been told prior to the contract that he could do it.

In fact, they had always packed it that way, in fact the boxes called for in the specification were too large for one in a box, the caps would bounce around.

However, it was still not in the procurement file. As far as I thought it should be rectified. I had no indication that the other bidders had indeed been told that. Maybe those that were going to be successful had been told that information, I don't know, but I am sure that there were quite a number of bidders who did not receive awards.

The CHAIRMAN. Your file shows they made the bid on the basis of placing one hat in each box?

Mrs. HORT. Yes, since the box turned out to be expensive it may have been a factor in making the awards.

The CHAIRMAN. Then after that they were granted deviation? Mrs. HORT. Immediately, before production actually began. The CHAIRMAN. On the file that you had, the official file, it indicated that they had made a bid to supply a box for each hat?

Mrs. HORT. Yes. Well, printed invitations went out which gave all the specifications which became a part of the bid, which were part of the bid. The contractor did not have to fill that part in that he would supply such and such. It was preprinted on the bid and noted that was part of the bid.

The CHAIRMAN. That was part of the contract?

Mrs. HORT. Yes, and part of the award, too.

The CHAIRMAN. That was the condition of the award that they were to supply a box for each hat?

Mrs. HORT. Yes.

The CHAIRMAN. Then the request for deviation came in after the contract had been executed?

Mrs. HORT. Yes, sir; after the contract had been awarded.
I don't know just how shortly thereafter.

(At this point Senator Bender withdrew from the hearing room.) The CHAIRMAN. Proceed.

Mr. KENNEDY. Now, these conversations that you had with your superiors regarding Harry Lev's answer to these deviations, who were your superiors in particular with whom you discussed this?

Mrs. HORT. The contracting officer, Captain Wool, Raymond Wool. Mr. KENNEDY. Who else?

Mrs. HORT. David O'Shiver; he was procurement officer, civilian. He was a procurement officer. He was the middleman between the contracting officer or the chiefs of the branch and the chief of ASTAPA.

In other words, he passed on things before they went to Colonel Howard.

Mr. KENNEDY. So with these two individuals you had these discussions, you had one position and they took a different position? Mrs. HORT. Yes, sir.

Mr. KENNEDY. At the time you left ASTAPA you don't know whether that money was ever collected?

Mrs. HORT. At the time I left it was not collected.

Mr. KENNEDY. And no effort that you know of was being made at that time to collect the money by these two individuals?

Mrs. HORT. No, sir.

Mr. KENNEDY. To the contrary?

Mrs. HORT. As far as I know, when I left my form 85 was still on the contracting officer's desk. I do recall, sir, that an effort was made to show that the request for deviation-well, no, that is not right-that the deviation would be granted-wait-as part of the invitation, in other words, it was not documented in the procurement file.

An attempt was made to put in something to the effect that this packing would be 2 to a box instead of 1 as part of the negotiations prior to the award.

Mr. KENNEDY. How did that come about? Was there some sort of memorandum to that effect?

Mrs. HORT. Yes, sir; there was.

(At this point Senator McClellan (chairman) and Senator Ervin were present in the hearing room.)

Mr. KENNEDY. Mrs. Hort, there was a memorandum, as I understand it, written shortly afterwards to indicate that this agreement of packing two to a box had been made prior to the time that the contract was awarded; is that right?

Mrs. HORT. Yes, sir.

Mr. KENNEDY. Is this the memorandum you had in mind?

Mrs. HORT. Yes, sir.

Mr. KENNEDY. It is a photostatic copy of that memorandum?
Mrs. HORT. Yes, sir.

Mr. KENNEDY. Would you read that memorandum into the record?
Mrs. HORT (reading):

It is the distinct recollection of Maj. Eric C. Farnell

The CHAIRMAN. You identify that as a memorandum that was placed in the file? This is a photostatic copy of it?

Mrs. HORT. Yes, sir.

The CHAIRMAN. Then it will be made exhibit 17.

Mrs. HORT. I don't know if you know there is a notation on there. It says "Do not send to central file."

The CHAIRMAN. What would that notation indicate?

Mrs. HORT. That would indicate that they changed their mind about it.

The CHAIRMAN. That they had changed their mind about it after placing the memorandum in the file?

Mrs. HORT. Yes, sir-no, after it was written.

The CHAIRMAN. After it was written?

Mrs. HORT. Not after it was placed in the file. It was not placed in the file, or should not have been.

Mr. BELLINO. This is a form DD-96, known as a disposition form. The subject refers to P/D-NY-1-) 654-00-1-02 QM 9821 and QM 13915. It is dated the 3d of July 1953 from the Chief of the Contract Administration Branch, to file. Paragraph 1 [reading]:

1. It is the distinct recollection of Maj. Erie C. Farnell, who was contracting officer of contracts awarded against subject P/D's, that at the time negotiations were conducted with bidders under subject directives, bidders were given to understand that applicable packing specifications would be changed to call for 2 caps to a box in lieu of 1, resulting in 48 caps to a shipping container in lieu of 24.

2. The reasons for the proposed changes were:

(a) That boxes were difficult to obtain, and,

(b) That the savings effected as a result of this change would be reflected in lower award prices.

62915-55-17

3. The intention at the time was to incorporate the packing changes into the contracts; however, it was overlooked, and contractors of necessity had to write for permission to "Deviate" from specifications. Permission was granted by letter in all instances where requested, with the standard provision that all savings would revert to the Government.

4. However, since the savings effected by the packing changes were taken into consideration by the contractors in computing their bids, actually no savings were effected.

It is signed by Eric C. Farnell, Major, QMC, chief of the clothing purchasing branch and has a notation, handwritten notation: "Do not send to central file." Also a notation of "Copy in each file.” It is indicated that it was prepared by SDTAA-PGH-(RW), close parenthesis.

The CHAIRMAN. Mrs. Hort, has that been read correctly?

Mrs. HORT. Yes, sir.

The CHAIRMAN. May I see it, Mr. Bellino?

Do you know whose handwriting this is, this notation on it, "Do not send to central file"?

Mrs. HORT. No, sir.

The CHAIRMAN. What is the central file? What does it refer to? Mrs. HORT. Well, instead of the individual files that we had for ready reference there was one central file which was the permanent record actually.

The CHAIRMAN. Which was the permanent file?

Mrs. HORT. Yes, sir.

In other words, we could have an extra copy, let us say, for distribution to various other sections, though in this case I don't know if anybody else would have needed copies.

The CHAIRMAN. This memorandum then went to what we call the working section where they were working on the file where it was being processed?

Mrs. HORT. I don't know. I don't know where it finally wound up. The CHAIRMAN. You do not know where it finally went?

Mrs. HORT. No.

The CHAIRMAN. But the instructions were not to place it in the central file?

Mrs. HORT. Yes, sir.

The CHAIRMAN. What advantage would there be in not placing it in the central file?

Mrs. HORT. It would be something as if it had not been written. The CHAIRMAN. It would be what?

Mrs. HORT. As if it had not been written. Many things were written that never-you know, that wound up in the waste basket. You don't send in a file copy of that unless it is a matter of record.

The CHAIRMAN. As I understood you a while ago, you said that this memorandum on it not to send it to the central file indicated that the author of it had changed his mind.

Mrs. HORT. Yes; it would indicate that. As I say, many letters that are written do wind up in the wastebasket for various reasons, such as you decide not to send it, or you discover an error.

The CHAIRMAN. If these facts are true as set forth here, would

you think it should belong in the central file?

Mrs. HORT. It certainly should.

The CHAIRMAN. If the facts are true it belonged in the central file, did it not, according to your system?