selves, they show that the first contract, about which Mr. Lev has testified that he got permission from you to submit a bid on the basis of 2 hats in a box, or at least this many were provided under the contract, was 755,208 caps were furnished under that contract; the second one, the one made in March following, was for 821,976, or a total of 1,577,184 caps that were supplied under the 2 contracts.

On that basis, if 0.0454 is correct, then there would be, on those 2 contracts, an advantage somewhere, either to Mr. Lev or to the Government, in the amount of $71,604.15.

I simply mention that as factual, to get in your mind the importance and the consequence of such an agreement being made verbally and no record being made of it.

Colonel SHIRLEY. I understand.

The CHAIRMAN. You say in view of that, certainly no such conversation took place between you and Mr. Lev when Captain Farnell was present?

Colonel SHIRLEY. I had no such conversation.

The CHAIRMAN. Did Captain Farnell, in your presence, have any such conversation with Mr. Lev?

Colonel SHIRLEY. In my presence, I do not recall Captain Farnell having any such conversation.

The CHAIRMAN. Did you know afterward that a request was made to do that by telegram from the Lev Co. ?

Colonel SHIRLEY. I know that the Lev Co. requested that, because we could not get enough boxes.

The CHAIRMAN. In other words, the question of two hats in a box, the first time that came to your attention was after the awards were made, when Mr. Lev found that he was having difficulty getting the material for the packing because there was a shortage of such materials?

Colonel SHIRLEY. Well now, that might not quite be right. I don't know what the date was. Certainly this is right: There was no authority given him prior to award to base his bid on that basis. He would have to make the request for the change.

The CHAIRMAN. In other words, there was nothing to keep him from making his bid on the basis of the bid invitation?

Colonel SHIRLEY. That is the only way he could make it, Senator. The CHAIRMAN. There was nothing said by you or by Captain Farnell in your presence that gave him permission to submit his bid on any basis other than the invitation itself and the specifications contained therein?

Colonel SHIRLEY. That is correct.

The CHAIRMAN. So you never head of this request

Colonel SHIRLEY. No, sir.

The CHAIRMAN. Or this question of packing 2 hats in 1 box until after the award was made?

Colonel SHIRLEY. That is correct.

The CHAIRMAN. How long after? Do you recall?

Colonel SHIRLEY. I suppose it was about the time he was ready to make the delivery, I am sure.

The CHAIRMAN. About the time he was ready to begin delivery? Colonel SHIRLEY. I would think that would be it. That would be the normal time.

The CHAIRMAN. Well, you don't place any particular date in mind? Colonel SHIRLEY. No, sir.

The CHAIRMAN. I referred in my previous question to an exchange of telegrams in which a request was made and in which the request was granted, subject to the Government recouping the savings. Colonel SHIRLEY. That is the proper procedure.

The CHAIRMAN. I wonder if that came to your attention, this exchange of telegrams, and if that is when you had the first knowledge of the fact that there was a question about packing two hats in a box. Colonel SHIRLEY. Well, I couldn't answer that without looking at the file, and I am sure it wouldn't necessary come to my attention. That is a matter of contract administration.

The CHAIRMAN. Anyway, you do not know about the matter of exchange of telegrams?

Colonel SHIRLEY. I don't recall it, no, sir.

The CHAIRMAN. I believe that is all I have.

Senator BENDER. Colonel, what name or reputation did Harry Lev have around the base?

Colonel SHIRLEY. I am sorry, Senator?

Senator BENDER. What kind of reputation did Harry Lev have around the base?

Colonel SHIRLEY. He had a good reputation.

Senator BENDER. He had a good reputation?
Colonel SHIRLEY. Yes, sir.

Senator BENDER. Have you purchased many hats in your experience with the Government?

Colonel SHIRLEY. I haven't purchased too many. If you consider I purchased these, then I purchased quite a few, because this is quite a few hats.

Senator BENDER. What percentage of the business, do you recall, did Mr. Lev have, or his companies have, as compared with other contractors?

Colonel SHIRLEY. I don't have any idea. I don't have

Senator BENDER. He almost had a monopoly on this business; didn't he.

Colonel SHIRLEY. No, I wouldn't say that. Mr. Lev, of course, has a big hat firm. He has tremendous capacity at his firm.

Senator BENDER. Were you the recipient of any favors of Mr. Lev? Colonel SHIRLEY. No, sir.

Senator BENDER. Did you ever attend any of these Quartermaster dinners as his guest?

Colonel SHIRLEY. No, sir.

Senator BENDER. You never received any of the fish, any of the sturgeon, that he distributed?

Colonel SHIRLEY. No.

Senator BENDER. Why does the Quartermaster insist that the grommets and the stays be furnished by the individual contractor, and why not furnish it as Government-furnished property as in the case of the cloth and the buttons which were specified?

Colonel SHIRLEY. Well, I cannot answer that. That is a matter that is decided at a higher level than at the purchasing office in which we were located.

Senator BENDER. Colonel, who is your immediate superior?

Colonel SHIRLEY. My immediate superior at that time?
Senator BENDER. Yes.

Colonel SHIRLEY. I worked for Colonel McKenzie, who was Chief of the Purchasing Division.

Senator BENDER. On the matter of deviations, were you in contact with Mrs. Hort at any time regarding this transaction, or any other of the Lev transactions?

Colonel SHIRLEY. No. I wouldn't have been. That would have been the contracting officer's responsibility.

Senator BENDER. What did you do when you realized that Mr. Lev was not living up to the terms of his contract and shipping 2 hats to a box rather than 1 to a box?

Colonel SHIRLEY. I don't quite understand the question.

Senator BENDER. Obviously, the specifications, the contractural specifications indicated, that there was to be one hat packed in a box. Is that correct?

Colonel SHIRLEY. Yes, sir.

Senator BENDER. When you discovered that he was shipping two to a box, what did you do about it?

Colonel SHIRLEY. Well, Senator, remember, that was during the Korean emergency. We could not get enough supplies to meet all of our requirements in accordance with specifications, and in many instances, contractors made requests for deviations to the specifications. We had a packaging specialist to whom those things were referred, those requests, and a study was made to see whether or not the particular item was available. If it wasn't available, we took the next best pack that we could in order to secure delivery. I do recall that we had difficulty in getting enough packages to package these caps in at that time.

Senator BENDER. As the chairman, Senator McClellan, indicated, there was a differential because of the manner in which this was handled, where either Lev or the Government would save or would stand to receive $71,000 plus. Were you aware of that transaction and the amount involved?

Colonel SHIRLEY. I wasn't aware of it until last week when it was brought to my attention, or this week.

Senator BENDER. Since it was your responsibility as a representative of the Government, how does it happen that you were not aware of it? Colonel SHIRLEY. I was the Chief of the Branch. The contracting officer was the responsible person, together with the purchasing agent and his contract administrator. We had about five or six thousand contracts at that time.

Senator BENDER. Were these people in your branch?
Colonel SHIRLEY. Yes, sir. Yes, sir.

Senator BENDER. So that you agree it was a pretty loose business to permit a contractor to profit to the extent of $71,000 more, or have the advantage when he is in the market bidding with other contractors, and he is permitted to violate a specification?

Colonel SHIRLEY. But he wasn't permitted to violate it.
Senator BENDER. Obviously, he did.

Colonel SHIRLEY. Well, it appears that he might have, but actually it was not intended that he should at any time.

Senator BENDER. All right. But the fact of the matter is, he did.

Colonel SHIRLEY. Well, that is a matter of contract administration again, Senator.

Senator BENDER. That was in your department, Colonel.

Colonel SHIRLEY. That is true, but I had about 10,000 contracts at that time.

Senator BENDER. In your department, was every contract handled in the same manner, particularly when there were deviations and it was

obvious that there were?

Colonel SHIRLEY. In those instances, the contracting officer would get the request for the deviations. It was up to the purchasing agent, then, to follow on through on that, people who are technically qualified and whose job it is to buy these things, and see that the rights of the Government were protected. I had no idea that this wasn't the case in his case.

Senator BENDER. But certainly, didn't you have the responsibility for all of these people in that department?

Colonel SHIRLEY. I had the responsibility for the people in the department: yes, sir.

Senator BENDER. And you say you had a tremendous volume of business. I had very limited experience in a department store with 105 buyers, but it was my responsibility to watch those buyers, and to watch purchases.

Colonel SHIRLEY. Yes, sir.

Senator BENDER. I was the head man at the time of one unit, and considerable money was involved. So it became my responsibility, as the head man, to watch these purchases. Certainly that was your responsibility.

Colonel SHIRLEY. Well, I certainly tried to watch the responsibility. I certainly tried to watch that responsibility.

Senator BENDER. Obviously, you didn't.

Colonel SHIRLEY. Well, I think I-this just happens to be a case where, actually, it appears that the action to recoup wasn't taken. There is no way in the world-well, I wouldn't say that. If I had everyone of those papers come across my desk, I probably would have seen it.

Senator BENDER. You know, of course, that we operate in this country to certainly as far as Government business is concerned, except when we are operating with a short item in an emergency-permit every dealer to have the same privilege as the other dealer.

Colonel SHIRLEY. That is right. We did here also.

Senator BENDER. That is the job of the Quartermaster Corps. That is why we have a Quartermaster Corps. The infantry, the artillery, and all the other branches, they are not supposed to be conversant with that. But you are.

Colonel SHIRLEY. Yes, sir, but I also have to delegate certain responsibilities.

Senator BENDER. What was your experience before you became the chief buyer in this particular agency?

Colonel SHIRLEY. I wasn't the chief buyer. We have civilians who were the chief buyer.

Senator BENDER. I understand. But you were in charge.

Colonel SHIRLEY. Yes, sir. I just had graduated from the Industrial College here in Washington.

62915-55- 52

Senator BENDER. You had no merchandising experience?

Colonel SHIRLEY. I had no merchandising experience before I went to New York.

Senator BENDER. Colonel, is it not true that the Army has changed the color of its uniform, and as a result there will be a series of procurements totaling between 2 and 5 million service caps during the next 2 or 3 years?

Colonel SHIRLEY. I don't have any idea about that, sir.

Senator BENDER. You know they have changed their uniform? Colonel SHIRLEY. I know they are in the process of changing it. Senator BENDER. And their requirements will call for that many to be used?

Colonel SHIRLEY. I don't know how many will be used. I am not in on that planning whatsoever. If I were to answer that question, I would be telling you an untruth. I don't know.

The CHAIRMAN. Colonel, the Chair, before interrogating you further, would wish to make a correction for the record. In the calculations I made a while ago, they were accurate except as to one thing. Mr. Lev and his company did not get the contract for the total of 1,577,164 hats. That was the total requisition. So the Chair was in error when he ascribed to Mr. Lev and his company a contract or two contracts aggregating that many caps.

The record reflects that Mr. Lev actually produced out of those hats, 577,208. The staff advises me that calculated on the basis of 0.0454, it would amount to $26,205, the differential, the savings, in the hats that were packed by Mr. Lev. I wanted to correct that.

If, as some testimony reveals, there is possibility of a saving of 71⁄2 cents a cap, if that is true, if the saving was that much, then there would be $43,290.60 involved in savings.

In fairness to Mr. Lev, I wanted to correct that. The Chair inadvertently ascribed to him the contract for the total of the two requisitions.

I wish to read to you now a paragraph, or three paragraphs, from a letter, Colonel, which has not yet been made an exhibit, but which will be made an exhibit in the course of further testimony. To save recalling you back to interrogate you about it, the Chair will read from these paragraphs now and later this letter at the proper time will be made an exhibit to the testimony.

This is a letter dated September 15, 1953, written on the stationery of Mid-City Uniform Cap Co. It is addressed to Capt. Raymond Wool, United States Air Force, Contracting Officer, 111 East 16th Street, New York 3, N. Y. Subject: Q. M. 9821 (0110576) and Q. M. 13915 (0116858). My understanding from the staff is that these are the two contracts we are discussing.

Re Item, Cap, Wool, Service, Wool, Serge, 15 ounces, blue, 34, USAF, Adjustment in Contract Price.

DEAR SIR: The undersigned hereby makes application for the following relief pursuant to Title II of the first War Powers Act 1941, as amended, by virtue of mutual mistake. It has been orally agreed that the amounts $12,585.24 under contract QM 9821 (0110576) and $13,620 under contract number QM 13915 (0116858) have been eliminated during the negotiation of the contract. These amounts were established due to the packing of 2 units per box rather than 1 cap to the box as was originally planned. This change in packing was mutually agreed to as a result of the then existing critical shortage of corrugated paper cartons, and to expedite deliveries which were of vital importance. At that time a fair and equitable price adjustment was arrived at by both parties.