Detroit evening times. (Detroit, Mich) 1921-1958, 1941-10-11
Arms Cost
Out of Line,
johnson Says
Hitler Seen Getting More
for. Money Than U. S.
By HUGH S. JOHNSON

eyed stuff floating over
the price control declarations.
Representative Vinson wants TO
limit profits to z per cent of
manufacturing cost on defense
contracts whether or not with
the United States.
Mr.. Vinson has conducted and
will continue 10 conduct an
investigation into defense costs
and profits. Thus far he has
found some outrageous percent
ages Of profit, 274 per cent in
one case.
What he is doing in the way
OF investigation is one of the
healthiest and most necessary
moves we could make. Reports
of our defense effort have been
made mostly in dollars and
while ii can't be said that they
don't mean a thing. il can be
said that they are deceptive.
WE ALREADY know that in
w the case of building canton
ments costs mounted far oHt of
line with precedent or reason.
There is a good reason TO be-
lieve that we are getting pitt
fully little for the dollars that
we spend and that Hitler proba-
bly, gets three 10 four times as
much for his armament money
as we get for ours.
This OF Itself is one OF our
greatest infiationary threats,
not to mention the fact that
there must be some bottom TO
Uncle Sans SOCK and that we
could defeat ourselves on this
front alone If somebody doesn' {
pay some attention 10 what we
are getting for our money.
Mr.. Vinson apparently pro-
poses TO pay great deal of at
tention. Let US thank heaven
for that.
But this business ofg'cost plus
percentage of profit" is old
and deadly stuff. II was our
curse in World War I. As a
result we adopted a little less
vicious formuia-Hcost plus a
fixed fee"
HERE is the difference. II
IL your profit depends, as it
does in ordinary competitive
commercial life, on costs as low
as Yeti can get them, you are
not apt to GO out like drunken
sailor and Squander as much as
you can TO produce an article.
You will try TO produce il as
cheapIy as competitive condi-
tons will permit.
But. if you are relieved from
all care and responsibility about
that and because of a fixed per-
centage based on costs as the
measure of your profits. you not
only have no incentive 10 reduce
costs but you have a powerful
incentive TO push them up be-
cause the higher they go the
greater is your profit.
THIS is not theoretical. 1t
Il stands 10 reason in human
nature and il was amply demon
strated by experience in 1917
and 1918.
The cost plus a fixed fee
alternative now more generally
used didn't altogether remove
these evils because il still left
the contractor with small re-
sponsibility for rising costs but.
at least, II did not encourage
him 10 boost costs as does the
cost plus percentage of cost"
rule.
1t is a difficult and complex
problem. But as types and man.
ufacturing costs become more
standardized and especially If
we can get price and wage con-
troll legislation, so that a manu-
facturer can plan his costs with
intelligence and the government
can pass on them with equal
intelligence. perhaps we can 90
back TO the competitive system
in awarding contracts.
Then we can go in with some
kind Of intelligent corporation
tax bill and eliminate exorbitant
profits due 10 war. But let's not
90 back TO the proved failure Of
cost plus percentage of profit.
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