Evening star., 1942-09-01

tiation' of con- David Lawrence.
tracts Because some selfish and mar
row-visioned businessmen have
abused the profit margin in Govern
ment contracts, the political dema-
gogues have now forced recon-
sideration of all contracts to the
point where the SO per cent of the
countrys contractors who are pa
triotic and cooperative are to be
subjected to the penalties of an in
spection and renegotiation system
that has behind it no definite or
ealculable yardstick for opera ting
business.
The gravity Of this new time
wasting and energy wasting policy
Is best Illustrated by a telegram
which has just been received by
every member of the House and
Senate, from one of the largest pro-
ducers of ammunition for the
United States Navy, company that
has been in business for more than
10 years and has had a chance to
encounter and comply with every
form of red tape ever devised. John
B. Hawley. jr., president of the
Northern Pump Co. of Minneapolis,
Mimi, telegraphed members of Con-
gress as follows:
War machinery production has
continuously declined since renego-
tiation law No. 528 was passed on
April % last. Renegotiation has
made all of the efficient fixed price
contractors, which are the backbone
of defense machinery production,
operate on a cost-plus basis, thereby
wrecking all normal established
procedure so that they can conform
to renegotiation boards cost plus
a-percentage- of-cost rulings.
Contracts Worthless"
"All contractors now know that
past and present contracts with the
United States Government are
worthless and that they can be de-
stroyed at the whim of any mex
perienced local bookkeeper without
practical appeal. Industrial leaders
know that renegotiation boards are
using kid glove methods until after
the new tax bill becomes a law and
elections are over.
Contractors are nauseated by con-
tinuous audits by inexperienced
groups of local auditors wastefully
duplicating experienced Federal in
come tax audits, and wasting execu-
tive ability which is badly needed
to maintain production under ad-
verse conditions such as conscrip-
ton, labor unions, material short
ages, design changes, production
schedule changes, etc.
1.-THE manufacturer can only profit
after taxes are paid and you can
certainly make a tax law limiting
war profit to small percentage
after payment of Federal taxes. Then
the manufacturer has every incen-
tive to finish his contracts in the
shortest period of time and at the
lowese possible cost.
"Renegotiation forces contractors
to diminish shipments so as to main
tain high costs or have their con-
tract price cut as soon as they reach
peak efficiency. Investigate costs OF
material under t-plus-flxed-f fee
contracts and in Government-oper-
ated shops compared to net costs tc
the Government on fixed price con-
tracts less income taxes on profit
Then, If you desire to bankrupt the
Nation and lose the war, keep public
law No. 528. thereby placing all wal
contracts on cost-plus- percent
age-of cost basis.
Cloud of Uncertainty.
This war will require hundred
times as much war machinery as
did the last war and if this ma
chinery must be produced on the
law No. 528, imitation is inevitable
I was in Germany five years age
and even then their factory eff,
cheney was superb. I have bull
naval machinery for 10 years. Thi:
corporation is the largest private
producer of naval ordnance ma.
chinery. This telegram is desper
ate personal plea on behalf of in
dependent manufacturers operating
on fixed-price contracts to let u
operate efficiently"
Since public law No. 528 wa
passed, the Price Adjustment Board
in the War and Navy Department
have struggled to devise formula
but though conscientiousls at
tempted, it is an ex post facto actor
and does not enable a manufac
turer to tell either in advance o
taking a contract or while he
executing it just where he is comm
out. Industry can't operate unde
that cloud of uncertainty. The Sen
ate Finance Committee has unde
consideration a plan to limit profit
after taxes and that's the sensibl
approach.
Reproduction Rights Reseryed)