On March 29, 1968, the Army canceled Phase II of the procurement and revised the request for proposal to indicate that two manufacturing sources would be selected rather than one. At the same time, on the basis of a JCS directive dated March 27, 1968, the delivery schedule was substantially advanced and the quantities to be manufactured by each of the selected producers were reduced, thus suggesting that the increase in total quantity representing a decrease in the quantity to be procured from any one producer could not have materially affected the ability of any one of the four technically qualified to deliver.

The Army stated that the awards would be made on the basis of the technical proposals that had been submitted under Phase I, but that the awards would be by means of letter contracts subject to agreement on a reasonable price. A letter contract would state a price ceiling, the actual price would be negotiated at a later date.

The March 29 provision also eliminated price as a factor to be considered and instead indicated that the procurement would be made from those sources "which will afford to the Government the highest degree of confidence in their ability in meeting or exceeding the accelerated schedule *** while maintaining good quality and provide the Government the strongest mobilization base." In effect, this made the "confidence factor" the sole element in the procurement.

The March 29 revision also permitted the offerors to propose modifications to the $4 million ceiling that had been set for purchase of the equipment to be procured for the Government account. In addition, the incentive and penalty clauses which had been previously included were deleted, to me a rather strange requirement in the light of the fact that they would seem to contribute to the delivery deadlines which the Army has emphasized were so much a part of the change in the rules.

On the same day, March 29, the four companies qualified under Phase I were asked to report to the Army Weapons Command on April 4 and 5 to discuss proposals regarding the new ground rules. These companies were Hydramatic Division of General Motors, Harrington & Richardson, the Maremont Corp., and the Cadillac Gage Corp.

In a conversation with the vice president of the New England Maremont Corp., he told me that he met with the Army representatives on April 4 and testified that the Maremont Corp. had the ability to adjust to the Army's changes and presented the necessary revisions in the Maremont technical proposal to meet the accelerated schedule. He also indicated that the Army did not ask any questions to clarify misunderstandings in the Maremont oral presentation nor did they ask questions in the areas that the Army later claimed they lacked sufficient detailed information.

A few examples of the Army's failure to seek out information can be cited from the Army debriefing statement.

Incidentally, if that debriefing statement is not a part of the record, I would like to suggest, Mr. Chairman, that it be made a part.

Senator CANNON. The debriefing statement is part of the committee's files.

Senator MUSKIE. I assumed it would be.

I quote from the debriefing statement:

(a) "There is a deficiency in the explanation of responsibility for the engineering element. Assignment of responsibility to engineering must be assumed mostly from a study of organization structure."

If the Army needed greater clarification-and that seems to be the only question raised by this objection of engineering responsibilities; why didn't they ask for it?

(b) "There is no indication that professional safety personnel are available to administer the range safety program or inspect operations."

How simple it would have been to ask this question and find out that the company has a safety officer and that Maremont has operated a firing range testing the M-60 machinegun and other weapons for the past 9 years without an accident. I am surprised the Army contracting officers were not aware of this fact, in view of the succession of M-60 contracts between the Army and Maremont.

(c) "The information submitted by the company was lacking in sufficient detail to arrive at an in-depth judgment. Except for the quality assurance manual, written standard operating procedures had not been provided * *

***

On page 42 of amendment No. 7, the Government states, "unnecessary elaborate brochures or other presentations beyond that sufficient to present a complete and effective proposal are not desired." I agree with the premise that "unnecessary elaborate brochures*** are not desired," but I also believe that every attempt should have been made by the Army to obtain the facts and information they needed to make a meaningful decision.

The attitude displayed by the Army representatives at the Maremont proposal presentation leads me to believe that charts, graphs, brochures, in a word "showmanship," was the important ingredient in deciding the best qualified. I cannot conceive that a company would be asked to make a presentation of fact and during the presentation not be asked questions pertinent to the subject being presented.

It is obvious to me, Mr. Chairman, that the Army did indeed go outside the presentations made by General Motors and Harrington & Richardson, in order to reassure itself upon the one criteria that became critical, the criteria of confidence. They could have gone just a little further, it seems to me, to have asked those questions which would clarify Maremont's presentation, in order to justify or disprove Maremont's eligibility under the confidence factor.

What value would a hearing before this Senate subcommittee be if the Senators present could not, or did not ask questions to clarify or develop information?

It is also significant to note that at no time was the Maremont Corp. asked to submit budgetary estimates of ceiling prices despite the fact that such estimates were prepared by April 13, as the Army had requested, and in ample time to be considered before any awards were made. On April 22, 9 days later, the Army released to the press an announcement that indicated that contract awards had been made to General Motors and Harrington & Richardson.

When I learned that there might be some question about the propriety of this procurement action, I immediately asked the Army to give me a briefing so that I might have the benefit of both sides of the story.

After hearing the Army's side, I was far from satisfied. It has never been satisfactorily explained why money was not a factor in the procurement nor could the briefing officers explain to my satisfaction the written debriefing statement of April 26, 1968 in which the Army repeatedly praised the capabilities of the Maremont Corp. Statements

such as:

**** the strongest point in your proposals is the evidence of your successful manufacturing experience since 1962 on Government contracts for the M-60 machinegun *** you were given a superior evalution in the packaging aspects of your proposal."

Now that kind of a judgment, Mr. Chairman, surely bears upon the question of confidence.

Another one: "in the important areas of barrel straightening and chromium plating the proposal also reflects a thorough understanding of the facilities and techniques required * * *"

"the proposal shows that personnel designated for assignment to the M-16 program are well qualified by education and/or experience ***1

"the response was considered very good in respect to company history and high-grade engineering capability."

in-house manufacturing of parts, in-process inspection and assembly is sound * * * your plans set forth in this part of your response were very good."

Certainly all of these, and there are others, Mr. Chairman, I have indeed selected only a few and there are others, are just a few examples of the statements that the Army made about the Maremont Corp. before turning down their bid. Surely they bear upon the question of confidence, which became the critical factor.

The briefing by the Army representatives did not help resolve the contradictions. The Army never adequately explained:

How it could have such high regard for the Maremont proposal, and yet refuse to honor that proposal;

How, in turn, the Army could show preference for General Motors, even though that corporation has never manufactured small arms, and its bid was $20 million more than Maremont's; And how, finally, the Army could further disregard its own judgment about Maremont's capability by contracting with Harrington & Richardson, even though the Harrington & Richardson bid was $6 million more than Maremont's.

And indeed, the curious thing about that debriefing, considering that the Army was in the position, having changed the rules, of having to supplement its information in order to form a judgment on the question of confidence, in view of that fact, and in view of the fact that the Army was now relying upon a wholly subjective judgment to make comparisons between these offerors, the Army at the outset of its debriefing pointed out that it was interested only in presenting its own case, and not getting engaged in argument, thus at the outset of the debriefing discouraging any attempt that Maremont might have attempted to make to clarify questions which had been raised by the Army to supplement information that might be useful in forming the new judgment, a positive discouragement of any inclination Maremont might have had understandably to supplement information already in the hands of the Army.

96-787-68

The major reason given at the briefing for selecting the General Motors Corp. was that the Army had more confidence in the General Motors Corp. to complete the contract on schedule. The Army's position concerning Maremont's qualifications was summarized in a question and answer session following the briefing as follows:

You were not amongst the two who gave us the highest degree of confidence and that is the way the award was made. I am not saying that you were disqualified on any point. On the contrary, I can tell you point blank that you were not disqualified on any particular point. It is the matter of which two gave us the greatest degree of confidence * * *

The Army has not demonstrated that General Motors is so much more deserving of confidence as to justify $20 million more plus unlimited amounts to tool up General Motors.

And how is this committee or anyone else to test that kind of subjective judgment, as long as the procuring officers, whoever they may be at the moment, have subjectively decided that one of three or four qualified offerors to inspire in him the highest degree of confidence, no one is to question that subjective judgment, and the Army is not required to present any objective evidence to support that subjective judgment which can be tested against reasonableness and rationality and the legitimate interest of the taxpayer and the other offerors involved.

The defense, in other words, rests wholly upon a subjective factor which cannot be adequately tested and which, in my judgment, is suspect because of the record which shows that the Army itself concluded Maremont is deserving of such confidence.

My reason for appearing before you today, Mr. Chairman, is to request that a complete investigation be made by this committee into the procurement action, and I understand that is underway. The investigation should be made from the standpoint of legality to determine whether the procurement regulations or procedures have been followed. I understand the House has asked GAO for such an investigation and that the GAO has submitted their report, which I have not seen.

Secondly, and more important, it is our responsibility as Members of Congress to question the judgment of the Department of the Army when in our opinion this judgment has been bad.

I want to make it clear that I do not suggest nor do I think it is necessary to prove that there were any dishonest acts committed by anyone in the Army. But one gets the impression that the decisionmakers in this case were taking the easy way out, by giving the General Motors Corp. an open checkbook. I am sure that they will get their rifles, but this decision was made at the expense of the American. taxpayers. It is also significant to note that the decision was made at a time when every level of government is being asked to cut back, to economize, a time when we are looking for means to cut the President's budget by $6 billion.

In closing, Mr. Chairman, I would like to submit for the hearing record a letter from Congressman Peter N. Kyros, First District, Maine, to the Honorable Richard Ichord, chairman of the House Special Ad Hoc Subcommittee to Investigate the M-16 Rifle Contract. I ask that because his letter undertakes to do what I have not had an opportunity to do, and that is to prepare a detailed brief of the

legal issues involved. I think it is important that this committee should have that, if it doesn't.

(The letter referred to follows:)

Hon. RICHARD H. ICHORD,

MAY 15, 1968.

Chairman, Special Subcommittee on the M-16 Rifle Program, Committee on Armed Services, U.S. House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: I have listened carefully to the Army's explanation as to why it selected General Motors and Harrington and Richardson as the two additional sources for the production of the M-16 rifle under RFP DAAF03-68R-0014. That explanation, although I have subsequently studied the text carefully, still leaves unanswered the charges which I made in my statement to the Subcommittee on Monday, May 13, 1968. Indeed, the explanation raises more questions than it answers. With your permission I would like to take this opportunity to make the following comments on the record concerning the Army's explanation of its recent actions with respect to the M-16 rifle program.

(1) It would appear that the Army's explanations have confirmed my previously expressed contention that the Army had already decided on a special sole-source procurement of the M-16 rifle from General Motors in early March 1968 and merely used this procurement as a means of awarding a contract to General Motors despite its obvious inexperience in the small arms field.

(2) Nothing credible was said by the Army representatives to indicate that General Motors was more qualified than, or as qualified as, my constituent, Maremont, to produce the M-16 rifle on the accelerated delivery schedule.

(3) Although the Army placed a great emphasis on the risk of non-delivery on the accelerated schedule and although this was given as the principal reason for making the award to General Motors, nothing was said which would in any way support the Army's contention that there would be a greater risk of non-delivery or slow delivery from Maremont.

(4) Although lip service was paid by the Army's representative to competitive pricing there was no explanation as to the incredible difference as among the prices of Colt's, General Motors', Harrington and Richardson's, and Maremont's.

(5) The only protection cited by the Army as to its price vulnerability, vis-a-vis General Motors, was the Truth in Negotiation Act. There is nothing in that Act to protect the Government against either crude inefficiency or as against high pricing.

(6) The award to General Motors was improper in that it violated the spirit, intent, and provisions of ASPR.

THE ARMY, PRIOR TO THE MARCH 29 AMENDMENT OF THE RFP, WAS PREDISPOSED TO MAKE AN AWARD TO GENERAL MOTORS

The Army admitted that discussions had been held with the Hydramatic Division of General Motors prior to the March decision to award to two sources under the Request For Proposal. It is significant that the Army did not mention any other companies with which similar discussions had been held. Indeed, this Subcommittee is aware that the Army was specifically considering an award to General Motors at that time. The question is immediately to be asked-“Why General Motors"-particularly in view of the Hydramatic Division's total inexperience in small bore rifle manufacture and in view of the mammoth tooling-up charges required. The only suggestion as to reason was "the company's capacity and outstanding performance against accelerated delivery schedules." Is General Motors the only company known to the Army which can meet accelerated delivery schedules or is the inference to be drawn that only the biggest corporations in America can qualify where large procurements on an accelerated basis are involved?

Subsequent events bear out my contention of favoritism. Among those items which support my conclusion that the Army was predisposed to the Hydramatic Division of General Motors are the following:

(1) The elimination in March of the previously existing $4 million ceiling on tooling to be paid for by the Government.

It was obvious that General Motors could not meet this requirement of the Request For Proposal, and it appears that the change was made in order to permit General Motors to qualify.