Imperial Valley press., 1941-04-27
by Peter Edison
The Inside Track in WASHINGTON

WASHINGTON, Apr. 26 -"Cost
plus contracts for defense pro-
duction, curse of the last war ef-
fort. arc TO be given a thorough
going over by the Truman commit
tee of Senate Investigators looking
Into national defense.
Counsel for the committee, Hugh
A. Fulton and Charles Patrick
Cralk. and their staff are now
sending to all contractors holding
cost plus fixed fee contracts for
government defense work request
for information on these jobs, and
is replies come in, they will be
analyzed to see how they look from
the governments point of view. If
profits or costs look out of line,
they will be examined further. De-
partment of Justice action for the
recovery cf excessive fees is the
ultimate possibility.
LONG
LITIGATION
There is still one case kicking
around in court in which the gov
ernment is seeking to recover what
it considers excessive profit made
on last war contract. 1t is an
action now before the Supreme
Court in which the government
asks modification of war contracts
made with the Bethlehem Steel
Corporation in l917-13 for ship
building. The action is a review of
two cases, one in which the CORP
Grafton seeks to recover SIS million
profits not vet paid, the other in
which the government charges that
Bethlehem submitted inflated cost
estimates, with the result it would
receive S25 million profit for doing
a S93 million job.
Today, according TO latest tabu-
lations of the army and navy, the
fixed fee contracts number more
than 300 with an estimated value
of about 50 billion. Total number
of contracts let is nearly a million,
with a value of S12 billion. The
army has let about three -fourths
of these.
Most of the contracts awarded
on the fixed fee basis are for con-
struction
Navy contracts include projects
like the new bases at Newfound-
land and Bermuda. Army contracts
include most of the cantonments
powder mills and bomber plants.
That there will be comparative
II little dirt uncovered by the in
yestigation of the defense effort
seems relatively certain. There
will be some bad jobs, and that's
inevitable in a program as big as
the present one, but the profiteer-
Ing mistakes of the last war made
good lessons for this one and as
Mr. Knudsen told the Truman
committee the other day, there
has been none of the shopping
around with contracts this time.
Last war. it was the custom for
one contractor to hog all the Jobs
l2e could. then sublet them and
collect commission which was
considered a part of the cost.
PROFITS
UNMENTIONED
At the start of the defense ef-
Tort, there was congressional ac-
ton intended to limit profits to
IL per cent. later reduced to 8 per
cent. When it was found however,
that this limitation made it i'm
possible to get sub-contracts, the
rules were changed SO that the
mention of all percentages was
Instead, contract pro- I
visions stated that jobs were To be {
done at cost plus a stated flat fee, :
which was computed at low per-
5entage of the estimated cost.
CLIO. economists have been max
ng much of the concentration of
contracts in the hands of a few of
he big companies, stating that 80 ,
concerns have received 85 per cent
1f the contracts so far issued and
claiming that Bethlehem and Du-
Pont groups got % per cent of the
.otal. This computation, however,
puts all the General Motors con-
.racts in the Dupont group.
Furthermore, this picture is
little warped because tabulations
ire based on primary contracts,
which are the only ones army and
navy are interested in. ANY one
of these primary contractors may {
get parts from numerous independ-
.nts As d matter Of fact, the North
merican bomber was laid out In :