Evening star., 1942-02-22
Congress Seeks Way
To Curb Profits Of
War Contractors
New Taxes, Audit
By Government Among
Proposals Considered
By CLARKE BEACH,
World Wide News Service.

In the belief that the home-front
battle against profiteering Is beinl
lost, members of Congress and Gov
ernment officials are seeking way'
to hold down the gains of war In
dustries.
In other words, profiteers have wor
damaging victories behind the lines
So far, there seems to be littlt
agreement among the leaders as tt
how potential profiteers are going
to be thwarted this time.
Three congressional committee.
have made investigations and have
found, as one of them reported, that
many firms doing business with the
Government have begun to rear
a harvest of excessive and uncon.
scionable profits" These commit.
tees still are probing. and severa
others are ready to study the situ-
alton.
Congress last week was warned
by the Supreme Court that it has
both the responsibility and the pow
er ito protect the Nation against
war proflteering" The Government
had sought to void Is World Wal
contracts by which the Bethlehem
Shipbuilding Corp. had claimed g
% per cent profit, but the court
decreed that the Government must
stick to its bargain.
Drastic Action Proposed.
Senators and Representatives wht
have become aroused by evidence
of some contractors getting rich out
of the war have proposed drastic
legislation.
Excess profits taxes. which woulc
bring back to the public treasury
part of the earnings considered TOT
fat, are being urged in many quar-.
ters. But there is also much op.
position. on the grounds that such
taxes will unfairly penalize all in
dustry. They will fall not only or
the profiteer, opponents argue. bu
also on those firms whose profit.
are moderate.
A per cent limitation on the
profits from all defense orders ha.
been advocated by Chairman Vim
son Of the House Naval Affairs Com
mittee. But Government procure.
ment oficials In the past have pro.
tested that in a great many cases
higher profits are justified. Indus
trialists have shown that a firm
may lose heavily on some defense
contracts and therefore must make
up losses on subsequent contracts il
it Is to remain solvent. In any case
officials have said. such an iron
clad limitation will slow down the
speed with which contracts can be
| let.
! Chairman Walsh of the Senate Ma.
val Affairs Committee favors a Law
which would make war profiteerine
a criminal ofiense. punishable with
10 years imprisonment. Those
liable would be Government con.
tractors who make false statements
in connection with the settlement o,
performance Of their orders, and
those who make unreasonable OF
exorbitsnt" expenditures in carry.
ing out contracts based on costs.
Can Examine Accounts.
The second war powers bill q,
passed by the Senate would enabl,
the Government to examine thu
books Of defense contractors. Tit
War Production Board already i.
/ planning to operate under this leg.
islation. This would enable the w
p. B. to see for itself what profit.
| are, earned, so that policy as tt
fair rates can be formulated, ans
to check up on contractors cost!
to be sure accounts are not bein,
padded or money wasted.
The Justice Department has Sc
up a war frauds unit to deal with
war contractors who are guilty oI
bid rigging, account padding ane
swindling.
The big money for those who hops
to profit out of the war Is in thu
Governments enormous purse
$138 ,000, 100000 in war appropria'
tions, authorizations, Reconstruc.
ton Finance Corp. commitments
and presidential requests for funds
Racketeers and swindlers have founc
ways, however, to pick up small
change by playing on the sympa.
thies of the general public in such
ventures as war charity rackets-
which. authorities say, are fortun.
ately not numerous.
The President has asserted tina
no war millionaires shall be ere.
ated this time. Terms of Army anc
Navy contracts have been drasti
cally revised since the World Wa
in order to forestall those who seel
to prof1teer. The chief reform ha
been, eliminating the cost plu
percentage of cost" contract, b,
which a contractors profit was ir
proportion to his costs. The NOR,
wasteful and extravagant he was
some argued, the higher his fet
became.
Cost Plus Fixed Fee.
The alternative which agencie.
now are using is the cost plus fixec
fee" contract. The Government ane
the contractor agree on the fee be.
forehand; but the cost factor is still
a main source of trouble, since tn,
contractor has no incentive fol
thrift and an INSCRIPTIONS con.
tractor can pad his account.
Some form of negotiated contract
however, must be used in wartime
The usual system of Government
purchasing by competitive biddin,
breaks down when time is shor
and the Nations full productive
capacity is needed to turn out wal
materials.
An arms company was criticized
for allowing costs to mount I'm.
necessarily, in report TO the Faddi,
committee, an arm of the Hous,
Military Affairs Committee. Tn,
group reported that this company
had employed defense brokers" tt
manage portion of its subcon.
tracting-a service which, the com.
mittee said, the company itsel
should have performed under it!
contract.
One of these brokers, the grour