Evening star., 1943-03-28
New Crop of War Millionaires
Unlikely Under Federal Curbs
Contract Renegotiation and Excess Profits Tax
Serve to Hold Down Earnings Despite
Huge Construction Program
By Charles G.. Ross.

964,OOO The amount was cut to ST.
50o,O0O
Company G would have made ST.
454,0O0. It was permitted to make
$4,000
Among the cash refunds to the Gov =
ernment on 1942 contracts was one for
$76 900 900. There have been refunds Of
such amounts as $24 300 900, S13,5OO,O0O.
s12 200, 900, $3.50 900, Sc, ,7Oo,o 900, $780,
O0O
Big Savings to Government.
Adjustments are of two kinds: Cash
refunds of which the foregoing amounts
are samples, and price changes. When
manufacturer starts making new and
| unfamiliar item, he is likely to have
only a rough idea of his costs He pro-
tects himself in his contract. AS he gains
| experience, he finds-in many instances
| that he can cut his costs below his
estimates. His profits soar, and renego-
| tiaton steps in and readjusts the price
| to the Government on the basis of the
| lowered unit costs.
General Motors is relating pridefully
| that through price reductions in 1912, the
| result of its manufacturing skill, it saved
| the Government s169,178,141, or the
equivalent of $50 interceptor planes. 1000
medium tanks, 200 torpedo boats and
1000 37-mm. anti-aircraft cannon.
The experience of the Western Cart
ridge Co. of East Alton, Ill, is typical.
1t received the first contract for the
manufacture of the Garand rife in a
commercial plant As the company got
the knack of making this type of rifle,
it found that It's unit costs sank mate
rally under estimates. Accordingly, it
offered to return to the Government
$l,500,000 of the profits earned on the
manufacture of the Garand in 1941.
Comparable to the Army's saving OF
over billion dollars on it's contracts is
the Navys saving, up to February %, of
$785 100000, about third of this being
due to cash refunds and the balance to
price changes. Both the services expect
further large savings on 1943 business,
and the Army estimating that on it's
contracts alone there will be reduction,
through refunds and price changes, ap-
proximating $4,000, 100000.
Maritime Commission savings through
renegotiation are estimated to run Sl58,-
100000 for this and the next fiscal year.
Cost-Plus on Way Out.
Eighty-fve per cent of the renego-
tiated contracts have been handled by
the Army, 13 per cent by the Navy, 2
per cent by the Maritime Commission.
These figures leave out the Treasury,
which has been covered by the renego-
tiation act only since October; the Treas
ury's' Interest is in Contracts under
lease-lend.
Incidentally, all cost -plus-fixed fee war
contracts are being changed over as fast
as possible to straight fixed-fee basis.
No new cost-plus-fixed fee contracts are
being made except on new jobs where it
is impossible to arrive at an accurate
estimate of costs.
Col Albert J. Browning who was at
one time director of heavy purchasing
for Montgomery Ward e. Co and later
the president of the United Wall Paper
Co., heads the War Departments pur-
chases division, under which contract
renegotiation is handled. Men who have
dealt with him call him tough cookie"
| Immediately in charge of renegotiation,
as head of the departments price adjust
| ment board, is civilian, Maurice Kar-
ker, formerly president of the Jewel Tea
Co. On Karker's staff are 25 officers, all
drawn from civilian life
The members of this adjustment
board-and equally their confreres in
the Navy and the other interested de-
signs of excessive profits on war con-
tracts. They are businessmen them
selves and they know the ropes. Say
they have reason to believe manufac-
turer of gun mounts is getting more
| than reasonable profit. They ask him
| for a breakdown of his contract-how
much of his work is for the Navy, how
much is for the Army. If the Army
proportion is the larger, the Army takes
over and tells him to put his cards on
the table. This may be- done at the
| home office Of the company, or Col.
Browning may telephone the president
and other officers and ask them to call
on him at a given hour on a given day
| at his Office on the fifth floor of the
Pentagon Building for check-up of their
profits. They may protest, they may
even write angry letters to their Con-
! gresham, but they show up, and If
Browning thinks they are making an
excessive profit, the contract is rewrit-
| ten
Potent Arguments Available.
Two or three arguments are used by
the adjustment boards in talking to a
contractor whose profits appear excess
sive. One Is the argument of his self
interest. 1t is suggested to him that he
may want other contracts in the future
Again, he is made to understand that
nothing could be better calculated to
wreck the whole private enterprise sys-
tenn than a belief on the part of the
public that a few favored individuals
were getting rich out of the war. There
is, finally, the appeal to patriotism.
In 81 per cent of the cases dealt with.
say members of the adjustment boards,
the contractors have proved reason
able" And the troublemakers have
been or will be brought around in the
end, for the contract adjustment law
has plenty of teeth. If any profiteers
escape the ministrations of the boards,
it will be because of the successful con-
cealment of fraud
Mr.. Karker made it clear at the outset
| that bo would ha or,,i5oc b,, +l,o aof $4,000,