General SHAW. Then until this time General Motors was in effect having a double shot at the job, was it not, one competitive and one noncompetitive?

Dr. BROOKS. They were still in the competition.

What we were trying to do, General Shaw, was to be ready to move in whatever direction that seemed appropriate as soon as possible.

Now during March, what happened was that the requirements that we saw as of the 1st of March kept going up. There were, for example, I mentioned the civilian irregular defense group requirement in Vietnam. This was not known to us at the beginning of March. This is something that came in as the traffic went back and forth and as the requirements became defined. It appeared at the beginning of March that we could satisfactorily do the job with one accelerated producer, one additional accelerated producer, and one on a normal schedule.

That became less and less likely as we went through March, and it appeared that we were beginning to get more and more requirements. Therefore, we decided to get two producers in and get them accelerated as fast as possible.

General SHAW. I have nothing more.

Mr. KENDALL. That is all the questions the staff has.
Senator CANNON. Anything further?

Senator SMITH. Yes, Mr. Chairman.

As I listened to the Secretary's statement, which is marked "Secret," I would like to ask just what is secret about this statement except the charts in the back?

Dr. BROOKS. That is the part of it, Senator, and the numbers of course of assets and requirements in the body of the statement.

Senator SMITH. So that the statement without the numbers and without the charts could be released?

Dr. BROOKS. Yes.

Senator SMITH. I do not intend to release it, but I did want to talk about it.

Dr. BROOKS. It could be.

Senator CANNON. Would you provide to the committee a nonclassified сору in the event that requests are made for it, if someone should desire it?

Dr. BROOKS. We could; yes, sir. We will be glad to do so.

Senator SMITH. Mr. Chairman, as I said at the beginning, it seems to me this is a very shoddy, shabby record, and that it may be that legislation is needed so as not to have repetition.

I want it well understood that I hope to do something about it. Senator CANNON. Certainly in the course of these hearings we will be better able to form a good judgment on that, but I, myself, am very much concerned about the position taken with respect to this picture so far.

Senator Miller?

Senator MILLER. Thank you, Mr. Chairman.

Going back to my question about the possibilities of negotiating downward these figures, I wonder if you could provide for the record some examples in rifle procurement where this has been done, so that we would have an idea of what you have been doing over the years, and what you have for a basis for optimism or pessimism.

Dr. BROOKS. Yes, sir. We will certainly do that, Senator. I do not know whether we can do it for rifle procurement, because I am not aware of instances in which we have used-we have. I will correct that. We have used a letter contract, one or more in the past. I would suggest that we do it in small amounts.

Senator MILLER. For rifle procurement it would be good, and then contracts with General Motors it would be good, so we might see (a) in the rifle area, (b) in the area of General Motors contracts.

Dr. BROOKS. Yes, sir; we will be delighted.

There were two actions with Colt's involving the use of ceiling prices. In December 1965 Colt's was awarded a letter contract for M16A1 rifles at a ceiling price of $115. The firm price in the contract definitized in June 1966 was $111.50, a reduction of 3%.

A modification to the June 1966 contract contained an option clause with ceiling prices of $95.50 for the M16 and $107 for the M16A1. Prices on the option quantities were definitized in December 1966 at $90.55 for the M16 and $102.30 for the M16A1. These prices represented reductions from the ceiling prices of 4% for the M16 and 5% for the M16A1. It should be noted that Colt's had extensive historical cost data upon which the ceiling prices were based.

There are two prime examples of letter contracts with General Motors.

On one letter contract for 105mm high explosive projectiles, the ceiling price was $9.00. The definitized contract set the unit price at $8.675, a reduction of 4%. On a contract for 81mm mortar projectiles, the ceiling price was $9.76. The negotiations prior to definitization of the award led to a unit price of $7.82, a reduction of 20%.

Senator MILLER. On the last page of your testimony, the middle of the paragraph, you say:

The equipping of South Vietnamese forces is a major step in our efforts to shift the greater portion of the war to their shoulders."

I was wondering if there was any significance to that word "the" as distinguished from the word "a"?

Dr. BROOKS. I do not think it was intentional, sir.

I understand your point. I do not think any of us can predict at this time who will be carrying the major share of combat. Of course it depends on many factors, and I would be the first to say that the rifle is one of them.

Senator MILLER. Yes; and I understand the predictability and all that, but I am wondering if that word "the" was your word, or if that came from some other policy statement that you drew from in making

that statement.

Dr. BROOKS. I do not believe so, sir.

I think the

Senator MILLER. Could you check with whoever helped you prepare that statement?

Dr. BROOKS. We will check on it.

Senator MILLER. And find out the source of the word "the.”

Dr. BROOKS. Yes, sir.

Senator MILLER. I will appreciate it very much. And furnish it for the record.

Dr. BROOKS. I shall.

(The information requested follows:)

As indicated on line 2, page 2, and line 10, page 11, of my opening statement, it is our plan to provide more M16 rifles to South Vietnamese forces so that they could assume "a" larger share of the combat. The use "the" in line 10, page 12, in reference to the burden of the war to be shifted to the South Vietnamese shoulders was unintentional.

Senator CANNON. If there are no further questions, the hearing will be recessed until 10:30 tomorrow morning. I say 10:30 because the Armed Services Committee is meeting at 10 o'clock, and we will resume at 10:30 here.

(Whereupon, at 12 noon, the committee recessed, to reconvene at 10:30 a.m., Thursday, June 20, 1968.)

ADDITIONAL PROCUREMENT OF M-16 RIFLES

THURSDAY, JUNE 20, 1968

U.S. SENATE,

M-16 RIFLE SUBCOMMITTEE OF THE
PREPAREDNESS INVESTIGATING SUBCOMMITTEE
OF THE COMMITTEE ON ARMED SERVICES,
Washington, D.C.

The subcommittee (composed of Senators Cannon (chairman), Stennis, Smith, and Miller) met, pursuant to recess, at 10:45 o'clock a.m., in room 224, Old Senate Office Building, Senator Howard W. Cannon presiding.

Present: Senators Cannon, and Smith.

Also present: James T. Kendall, chief counsel; Samuel R. Shaw and Robert M. Neal, professional staff members.

Senator CANNON. The hearing will come to order.

This morning we continue the hearings which we opened yesterday into the Army's issuance of contracts for additional procurement of M-16 rifles.

Our first witness this morning will be Senator Edmund S. Muskie of Maine. The subcommittee is conscious of Senator Muskie's active interest in all matters that affect the national security and the keen awareness he has for those things which affect his own State of Maine and the welfare of the citizens of that fine State. We are delighted to have the opportunity to hear Senator Muskie on this matter. This portion of the hearing will be in open session.

Following Senator Muskie's presentation, we will hear from representatives of the Maremont Corp., from Saco, Maine, one of the unsuccessful competitors in the M-16 bidding. Their appearance here today is in order to give them the opportunity to shed light upon several matters on which we had testimony from the Army yesterday. STATEMENT OF HON. EDMUND S. MUSKIE, A U.S. SENATOR FROM THE STATE OF MAINE

Senator MUSKIE. Thank you very much, Mr. Chairman, Senator Smith.

I debated whether or not I should try to read my complete statement or try to highlight it, and I think that perhaps I ought to read it, notwithstanding the fact that it repeats a lot of the facts about this whole situation which I am sure are familiar to you now, but I think perhaps by reading it, I can present my impression of the facts to you, and my very real concern that they reflect a cause for concern about the way in which this procurement was handled, so that I will read my statement, and perhaps make some additional comments.

First of all, I appreciate the opportunity to appear before you today to discuss the recent Army announcement that contracts had been awarded to the General Motors Corp. and the Harrington & Richardson Co. for the manufacture of M-16 rifles. Each award was for 240,000 rifles.

My interest in this particular Army procurement is threefold: First, I question the propriety of the Army contract award to General Motors and to the Harrington & Richardson Co. at ceiling prices of $56 and $42 million, respectively, when the Maremont Corp. was prepared to manufacture the same number of rifles for a ceiling price of $36 million.

Secondly, my concern about the first point is intensified in the light of the fact that Maremont's qualifications to handle this contract are so clear and strong from the Army's own evaluation.

Finally, I have a special interest in this matter since it was a Maine corporation that was declared an unsuccessful bidder. The loss of this contract by Maremont Corp. will affect not only the company but more importantly, the economy of the area in which it is located."

I would like to review briefly the history of this procurement action with you.

The M-16 rifle has since its inception been produced by the Colt Industries. In an attempt to establish a second source of supply for this rifle, and I emphasize that point because it seems to me it has been lost by the Army in its shifting of gears on March 29, we are talking about a second source of supply, not about an emergency procurement, but in an attempt to establish a second source of supply, the Department of the Army purchased the necessary rights and licenses from Colt's in June 1967. The Army then issued a two-step request for bids calling for the procurement of 167,000 rifles with delivery scheduled for August of 1969. The procurement was multiyear: that is, a 3-year program. It should be noted that in this request for bids the Army stated that "*** the contract will be awarded to that responsible offeror whose proposal would be most advantageous to the Government, price, quality, and other factors including special standards, considered ***." Phase I of the procurement, the submission of technical proposals, was to have been completed by January 20, 1968, and Phase II, the submission of price proposals, was to have been completed by May 10, 1968, but the due date was later accelerated to April 5, 1968.

May I point out that that date was prior to the time, April 22, when the awards were made.

A ceiling of $4 million was set at the amount that could be spent for the purchase of manufacturing equipment, to be used by the successful bidder. This equipment would be purchased for the Govern

ment's account.

A number of technical proposals were submitted by various companies in January 1968.

On March 8, 1968, the Army increased the quantity from 167,000 to 358,000 units and at the same time accelerated the rate of delivery. On March 19, four corporations, including Maremont, were considered technically qualified and were authorized to proceed with Phase II, the preparation of the price proposal.