Senator MoODY. No reaction?

Mr. SCHWARZ. He changed the subject and referred me to other contractors to try and get subcontract work to make up for this. Senator MoODY. Who was this officer?

Mr. SCHWARZ. The man I talked to most of the time was a Mr. Watson.

Senator MOODY. A civilian or a naval officer?

Mr. SCHWARZ. He is a civilian.

Senator MOODY. Here in Washington?

Mr. SCHWARZ. Yes, sir.

Senator MOODY._ In what branch of the Navy?

Mr. SCHWARZ. Bureau of Ordnance. Here is a copy of the letter that I sent to him. This is the one I didn't receive any answer to. However, I sent numerous letters. I submitted exhibits on what happened and everything, but it never did any good.

Senator MOODY. Is this the last letter you wrote, in March 1951? Mr. SCHWARZ. Yes, sir.

Senator MOODY. This letter states that you have been informed that new regulations have been issued to provide relief in cases such as yours. You ask him to advise you as to the proper way to submit your request for relief. You say you never got any answer to that?

Mr. SCHWARZ. I wrote this letter on the basis of this one. That is a man that I saw in the Department.

Senator MOODY. This is Mr. William H. Moore, special assistant to the Assistant Secretary of the Navy, apparently?

Mr. SCHWARZ. Yes, sir. He is the one that notified me when the law went into effect and sent me a copy.

Senator MOODY. Under date of March 8 this letter indicates you had a conversation about your filing a request for price relief. Mr. Moore suggested you put your request in writing, with the understanding he would advise you as soon as regulations under relevant legislation had been issued.

This letter says also, from Mr. Moore to Mr. Schwarz, that the Navy Department has officially received copies of the newly issued regulations. It says:

You will understand that some time at least will be required for the Navy Department to set up appropriate arrangements to handle applications. I am advised, however, that there is nothing now to prevent you from filing a request for relief with the contracting officer from whom you received your contract. Perhaps you would be well advised to write him asking for information as to the proper way to submit your request. By the time he receives your inquiry, he may be able to furnish such information to you.

Mr. Moore adds:

I regret very much the difficulty you have been experiencing, and hope you may have had delivery of the necessary materials by this time.

So, in accordance with this letter, as I understand it, Mr. Schwarz, you wrote to your contracting officer, is that correct?

Mr. SCHWARZ. That is right.

Senator MOODY. And this was on advice of Mr. Moore, the special assistant to the Assistant Secretary of the Navy, and you received no reply?

Mr. SCHWARZ. That is right.

Senator MOODY. Did you ever follow your letter up?
Mr. SCHWARZ. You mean this letter here?

Senator MOODY. Did you ever follow that up, yes, or just let it lie?
Mr. SCHWARZ. I called the contracting officer on the telephone.
Senator MOODY. You did? That is Mr.

Mr. SCHWARZ. Mr. Watson.

?

Senator MOODY. What did Mr. Watson tell you?

Mr. SCHWARZ. He was sorry that they couldn't do anthing, that they understood this other contract would take care of us and that he would send us some data. He said we shouldn't do prime contract work, anyway; we are apparently too small financially to handle it. Senator MOODY. Too small to take a big loss, is that the idea?

Mr. SCHWARZ. It is possible. Then he finally said he would send

some

Senator MOODY. The theory of the procurement officials of the Defense Department, I believe, and certainly the intent of Congress, is not that anyone should take a loss on these contracts, and that was the very reason that Act 921 was passed. Apparently you drew a blank when you talked to Mr. Watson, is that right?

Mr. SCHWARZ. That is right.

Senator MOODY. Is he still there?

Mr. SCHWARZ. Yes, he is. At the time the office apparently was smaller and he handled mostly all contracts, but now he is in charge of the small-business end of it.

Senator MOODY. He is in charge of the small-business end?

Mr. SCHWARZ. That is right.

Senator MoODY. Of what?

Mr. SCHWARZ. Of the Bureau of Ordnance Contract Division.
Mr. NOONE. In Washington?

Mr. SCHWARZ. That is right, a civilian. That is, he is under the command of Dinsmore and Captain Wales.

Senator MOODY. And he is in charge of the small business end of it? Mr. SCHWARZ. That is right, at present.

Senator MOODY. But he said your business was too small to take a prime contract, is that right?

Mr. SCHWARZ. That is the inference. I wouldn't say that was the exact words. Then he referred me to other prime contractors to get subcontract work, but, frankly, it is just like me going to the newspapers. I can find that out anytime. I have got to sell them on it first, that I can handle the business.

Senator MOODY. Can you be in the city tomorrow morning?
Mr. SCHWARZ. Yes, I could.

Senator MOODY. I think we ought to get Mr. Watson up here and ask him about this.

Do you have anything else you want to say, Mr. Schwarz? Mr. SCHWARZ. No. Senator, I don't, except I have other data here in case you need it or want it,correspondence that was carried on. Senator MOODY. If you will make that available to Mr. Noone, the counsel to the committee, he will look it over.

Mr. SCHWARZ. I might add that with the exception of material curtailment, not being able to obtain it as required, I have been producing over schedule. I am a little over half done on the first contract. I am almost completed with the second one. Naturally, I am making some money on it.

I am going to try and push it out, but there is no reason why I couldn't do one or the other. I mean, they stated 300 per month minimum: I have been delivering it when I have the material.

Senator MOODY. But as a general matter, you are going to have a net loss of $86,000 on your two contracts with the Government?

Mr. SCHWARZ. That is right.

Senator MOODY. Unless some relief can be afforded to you, is that correct?

Mr. SCHWARZ. That is right, and I have done other Government contracts, and to the best of my knowledge they have always proved satisfactory.

Senator MOODY. You mean your deliveries have proved satisfactory and the quality of your work has proved satisfactory?

Mr. SCHWARZ. That is right, both from an engineering and a billing standpoint.

Senator MOODY. That was not in the Second World War because you were not in business then?

Mr. SCHWARZ. No; but right now we have a contract with the Army to make 30 hard-top closets for a 612-ton, 6-by-6 vehicle. We are designing it and building it.

Senator MOODY. I might point out to you, Mr. Schwarz, that had your profit been too great, you might well be renegotiated. A great many businesses in the Second War that did make heavy profits on war contracts were renegotiated. The intention of the Congress and of the Government is to be fair about these things.

Mr. SCHWARZ. I understand that.

Senator MOODY. They do not want too heavy a profit, nor do they want anyone to take a loss. I will be very interested to see why your case has not been given better consideration.

Mr. NOON. Assuming you do stand this loss of $86,000, Mr. Schwarz, what would be the effect upon your business? What is the net worth of your business today?

Mr. SCHWARZ. Today it is around $82,000, I believe.

Mr. MOODY. The net worth of your business is $82,000?

Mr. SCHWARZ. That is right.

Mr. MOODY. And you are taking a loss of $88,000 on these two contracts?

Mr. SCHWARZ. That is right.

Mr. NOONE. So that unless you got relief, you would be insolvent, is that right?

Mr. SCHWARZ. No, I don't believe so. It is through a lot of hard work we have been able to keep it going.

Senator MOODY. He testified previously that he has had some other contracts, and he has already taken part of the loss, is that correct? Mr. SCHWARZ. That is right. I have absorbed that $44,000 already. Senator MOODY. He has already absorbed $44,000 of the loss. Mr. SCHWARZ. I have got another approximately $40,000 to look forward to before I am finished.

Senator MOODY. Unless there is some reason that does not appear so far from the testimony, I don't think it is fair to have to take this loss.

Mr. SCHWARZ. I understand also that when this contract is completed, they don't want any more containers. They are redesigning. They are in the process of redesigning it because of some regulations, so I can't even look forward to any more of this type to help make up for what is going on.

Of course, they tell me that on a competitive-bid basis, bring them up, and if I follow the newspapers, I will find out when that new contract comes up.

Senator MOODY. You have to find out from the newspapers about it? Mr. SCHWARZ. Or the board of commerce bulletins, but they are sometimes quite late, and you have got to watch them every day. Senator MOODY. If they don't want this type of container, have you considered asking them to cancel this contract?

Mr. SCHWARZ. I did ask them.

Senator MOODY. Permit you to fulfill your contract by delivering the new model container? Could you do that?

Mr. SCHWARZ. I haven't seen it, but I don't see any reason why I can't, unless there is something in there that doesn't lend itself to our shop. I have never been informed of it, and, frankly, I intended to go over to the engineering section. I was advised to do that, but what I could get out of it, they couldn't say.

Mr. NOONE. Mr. Chairman, I would like to note for the record that the Senate Small Business Committee made inquiry of the Department of the Navy in Mr. Schwarz' case on December 5, 1951, asking for all the facts in the case, and the reason why the Navy could not grant relief.

In a letter dated January 14, 1952, Rear Adm. M. F. Schoeffel, Chief of the Bureau of Ordnance of the Navy, stated that subsequent to the award of the contract for 6,000 rocket containers:

There was a requirement for 1,600 additional rocket containers. In an effort to assist Michigan Production Engineering to solve their difficulties, and in view of the fact that they were allegedly about to begin production of this item, the Bureau of Ordnance awarded the company contract NORD-11796. This contract was awarded on the basis of negotiation with the company for a price of $75.31 per unit, plus a tooling allowance of $11,020. It was understood at the time that if the second contract was awarded by the Bureau of Ordnance, this would solve the company's financial difficulties, in regard to the original contract.

Senator MOODY. Let me interrupt at that point, Mr. Noone. Is that in line with your understanding?

Mr. SCHWARZ. I never said that. They take it as that, but I merely said it would help our condition and at this time I will say that I was informed at the time we received that contract that they expected another need, additional need, for 5,000 more containers at a later date, and at that time, with this 1,600 plus that

Senator MOODY. So you told them if they gave you 6,600 more, rather than 1,600?

Mr. SCHWARZ. No, no; I didn't say that. They told me that. They told me they expected another 5,000.

Senator MOODY. But I say, you apparently said that if they could give you 1,600 more and then 5,000 on top of that, that that wouldMr. SCHWARZ. Put us in fair condition. In fact, I would be willing to forget anything.

Senator MOODY. If they would give you another 5,000?

Mr. SCHWARZ. That is right; but I did not discuss that with the contracting officer, however.

Mr. NOONE. That is the portion of the Navy letter on which I wanted to get an answer, whether in fact there was an agreement between you and the Bureau of Ordnance.

Mr. SCHWARZ. There was no agreement; no.

Mr. NOONE. That the second contract would solve your financial problems on the first.

Mr. SCHWARZ. Not at all. It was merely stated that it would help us, and it has helped us. It certainly hasn't solved the problem.

Senator MOODY. Well, thank you, Mr. Schwarz. We expect to have people from the Navy here tomorrow morning, and you may be interested in their testimony.

Is Mr. Robert G. Noone here?

Do you solemnly swear that the testimony that you are about to give will be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. R. G. Noone. I do.

TESTIMONY OF ROBERT G. NOONE, PRESIDENT, AMERICAN

AWNING & CANVAS CO., SPRINGFIELD, MASS.

Senator MOODY. Will you state name, address, and business, please? Mr. R. G. NOONE. Robert G. Noone. The business is the American Awning & Canvas Co., Springfield, Mass., 517 St. James Avenue. Senator MOODY. You are no relation, I take it, to the able counsel for this committee?

Mr. R. G. NOONE. No; and I was in bed sick when he first called me, and I was very startled and thought somebody was playing a practical joke, to be very frank about it. I had never met the gentleman up until yesterday.

Senator MOODY. I thought that ought to be in the record. I might say that Senator Saltonstall, who is a member of this committee, sent me word that he would try to be here this morning, but was unable to come. He has gone into this case, and he says he feels your case is one that deserves very particular consideration and probably relief, and for that reason the committee is going into this. Will you state how long you have been in business, Mr. Noone?

Mr. R. G. NOONE. If I may for just a moment preface my remarks by stating that I, unlike my predecessors here today, have had a comparatively long history of working for the Government agencies, various Government agencies.

Senator MOODY. I know that. In the Second World War, as a matter of fact, you produced 117 different items.

Mr. R. G. NOONE. Various items, that is right. Up to this world war, we had never been hurt. Consequently, we came into this thing probably feeling a little bit too sharp for our own good. Senator MOODY. You mean up to the Korean war? Mr. R. G. NOONE. That is right, up to the Korean war. Senator MOODY. We hope there will not be a world war. Mr. R. G. NOONE. We hope there won't.

Senator MOODY. What do you manufacture, Mr. Noone?

Mr. R. G. NOONE. Currently, we are manufacturing pack field cargo M-45.

Senator MOODY. What do you manufacture for civilian needs? Mr. R. G. NOONE. Generally speaking, commercial awnings, venetian blinds, tents, tarpaulins, laundry bags, upholstery, drapery fabrics, lawn and porch furniture. The upholstery and drapery goods is what we sell in our front office.