Evening star., 1942-04-17


contracts are In many cases too
large and in some instances Amer
ican corporations have been so
bothered about 1t that they have
voluntarily returned 10 the Treas
ury vast sums.
The House Naval Affairs Com
mittee, OF which Representative
vinSon OF Georgia is chairman, has
been doing remarkable piece OF
prodding for the last several months
and has managed 10 bring about a
saving OF $33.0oo.o00 by the simple
process Of asking a few pertinent
questions. "A
The reason there are at times
what are termed "unconscionable
proflts" is an interesting one and
the public ought to be told about 1t,
for there is not the slightest excuse
for concealment.
Contracts Negotiated.
The facts are these: Originally
most all Government contracts were
awarded on competitive bids. On
war work. however. involving as 1t
does new facilities and In many
cases entirely new processes. there
was no time for competitive bidding.
So the negotiated contract" was
substituted so as to get contracts
placed promptly. Usually the War
and Navy Departments selected
manufacturers OF proved ability and
prestige and gave them the big
contracts because Of their record OF
efficiency in industrial production.
But the question of cost could not
be figured accurately in advance.
The truth is that on many negoti-
ated contracts, the first figure asked
has been a protective one. A COM
pany always wanted to make sure
that the total price was big enough
to cover every contingency. Yet
when the products began to be
poured out in quantity, the savings
became stupendous.
May Require Legislation.
American industry has been doing
marvellous Job in getting war
weapons made and the savings made
will become part Of the profits un-
less there is a legislative require
ment TO turn profits back or unless
companies voluntarily do so.
There are cases in which new
plant has to be paid for and the
cost amortized over three or five
years, especially where private COM
panies have put up their own capital
for plants that will become useless
the day an armistice is declared.
Apart, however, from reserves to be
set Up to take care OF that kind of
situation, the profits still are large in
several well-known cases.
American businessmen are under
obligation to do something about
the profit question. As yet little
leadership has appeared. The cry
TO change the 40-hour week has
been met by the administration
statement that the matter of hours
Ii q matter OF dollars and cents and
that the Nation will pay the bill
To refute such an argument is i'm
possible If management takes profits
right and left without regard to
the savings made by quantity pro-
duction.
Big Companies More Fortunate.
II has been contended that the
tax bill will eat up most Of the profit.
But companies with big average
earnings prior to the war have ad-
vantages over companies without
such a record. Likewise. companies
with large amounts OF invested
capital have advantages over COM
petitors and potential competitors
not so fortunate.
When some OF the larger corpora
tionS next year happen TO show
earnings in excess OF pre-war, even
after paying the heavy excess pro-
fits taxes. there will be much criti-
cisrn. The subject is of even greater
Importance TO the small business
man who is struggling to pay back
debts. He Is faced with heavier
and heavier taxes really aimed at
the big fellow but likely to impair
the credit standing of the smaller
business enterprise, Labor'S demands
for higher wages will make quite a
dent on the public mind If profits
aren't soon limited either by vol
untary action or by some revisions
Of the negotiated contract system.
Reproduction RiEhts Ressrved)