Evening star., 1942-10-08
U. 5. War Contracts
ToAIIow Reasonable
Advertising Costs
Transportation ToneIe to
Be Cleored Up BY New :.
Lows. Patterson Says
By the Associated Press,

By the Associated Press.
Announcing that "reasor1able"
advertising expenses would be
recognized as legitimate costs in
renegotiating war contracts. Un-
dersecretary of War Patterson
said today he expected the en-
tire controversial question of
renegotiation to be cleared up
by legislation now before. the
Senate Finance Committee.
The matter of allowing contrac-
tors substantially engaged in war
production to charge. off the cost of
advertising their peacetime prod
ucts IN order to maintain public
GOODWIN for a postwar return to
civilian manufacture has been a
controversial point" Mr.. Patterson
said, and the price adjustment agen-
cles have decided to follow the
Treasury's tax policy of allowing
reasonable deductions.
Contract Renegotiations.
The downward revision of war
contract amounts by renegotiation
has operated we'll since it began last
April, he said, but the War Depart
ment favors certain amendments to
existing law, one of them stipulating
that a contract, once renegotiated
for a definite term, is final. This,
he said, should relieve the fears of
some manufacturers that the rene
eotiation process was endless.
The department also suggested to
the committee, Mr. Patterson told
press conference, that certain con-
tracts be excepted from renegoti-
alton where the profits could be
known with reasonable certainty
when the contract was made"
On. the troublesome point" of al
lowing as costs the accumulation of
reserves for reconversion of plants
to civilian production after the war,
he said the department was follow
ing the War Production Boards pol
Icy that such postwar reconversion
costs should be covered in the prices
of the civilian goods. In the case
of an automobile manufacturer, for
instance, he said the price of new
automobiles for postwar civilian
sale should be fixed high enough to
pay the reconversion costs.
Two Sides to Be Considered.
'But there is much to be said on
both sides,'' Mr.. Patterson added.
After all, the prevalent idea about
contractors flocking to Washington
to get Government business is not
well founded. 1t is true to certain
extent in the building industry,
where competition is keen. But in
most other cases the War Depart
ment has pretty well forced the con-
tracts on the companies"
He said also that there has been
considerable criticism of the renego-
tiation policy Of the department,
based on "the misinformation that
an army of accountants goes out
like a swarm of locusts and descends
on all contractors"
That simply is not true" he said.
I'm most cases the Price Adjustment
Board takes the contractors own
showing, backed by a certificate from
reputable outside auditors"
Postwar Markets Protected.
Mr. Patterson said the War and
Navy Departments and the Maritime
Commission had agreed on a policy
recognizing that it may be neces-
sary for producers to keep their
names and the names of their peace
time products before the consuming
public in order to maintain their
good will and be in position more
effectively to regain their normal
markets after the war is Won"
"The test of whether expenditures
for advertising are deductiole," he
said, 'is whether they are ordinary
relation to the business activities in
which the enterprise is engaged"
Changes in Army building meth
DDS are saving about 10000 tons of
metal in the construction of camp
facilities for every 100000 men, Mr..
Patterson reported.
Last year, he said, it required So
400 tons of metal for camp facilities
for 100000 men. Now the engineers
use only 33,400 tons. The principal
"eason is shift from permanent to
temporary types of structures.