Evening star., 1943-12-26
Contract Renegotiation Cuts
War Costs $4,747,176,OOO
BY Charles G. Ross.

and the whole vicious infationary circle.
The renegotiation device is definitely
anti-infationary; it is perhaps even more
valuable on that account than as an i'm
mediate money saver for the Govern.
ment. In the words of the energetic
businessman chairman of the War De-
partment's Price Adjustment Board,
Joseph M. Dodge, "the primary purpose
Of renegotiation is to accomplish sound
pricing"
Here are some significant new figures
which indicate how price control has
worked in war procurement: Bombers
(air frames only, which cost the Gov
eminent $235,000 each in 1912, now cost
$16O,000; in the same period the cost Of
fighter planes (air frames) has been cut
from s84 900 to $4,000; airplane engines,
from $15,900 to $1,000; 50-caliber ma
chine guns, from 1858 to $500; attack
bombers (air frames, from s81 900 to
$4,000; automatic pilots, from S4,50O to
$1,000. The remarkable reduction on
machine guns is expected to be carried
even further in negotiations now under
way.
Savings for Various Reasons.
These various cuts in psice-which
have been accompanied with improve
ment in quality-have come about, Of
course, from various causes. Patriotic
incentive, suggestions from workers, in
creased manufacturing skill, labor
agement cooperation, all have played a
part But the figures reflect also the
salutary influence of contract renegotia-
tion on prices.
The reaction Of better than 80 per
cent OF war industry, the War Depart
ment says, is typified by a recent state
ment of the Emerson Electric Co. Of
ST. Louis to its stockholders, in an
nouncing that net profits after taxes
had declined from 5 per cent to 1.3
per cent of sales. The statement quoted
an observation by James F. Byrnes,
director of war mobilization, to the
effect that if the private enterprise
system was to be preserved, the profits
must be taken out of war. This QUO
tation," said the companys report, "ex-
presses clearly the convictions of this
management"
The Sperry Corp. one of the largest
OF the Government contractors, re-
ported in 1912 that it had been able to
hold manufacturing costs lower than
1t had expected, with the result that its
profits on Government contracts were
larger than anticipated or desired"
Accordingly, said the company, it pro-
posed to the Government that these
profits be substantially reduced. The
renegotiation law was passed shortly
thereafter, and the company, COM
mended it as sound in principle and
"the only practical means yet developed
to prevent unreasonable profits on war
business"
Similar expressions have come from
| such large enterprises, among others
| as the Westinghouse Co., the Interna-
| tional Harvester Co. and the United
| Aircraft Corp. A statement by the
last-named gives this excellent sum-
ming-up of the case for renegotiation:
far Basis Possible.
1T furnishes the method by which
prices on contracts awarded under ex-
traordinary war conditions can be ad-
justed to fair and reasonable basis.
Price reductions, before excessive profits
can accrue, tend to keep costs at a
minimum. In this respect renegotia-
ton is superior to a broad profit limi-
tation, which reaches profits only after
they accrue and affords no incentive to
reduce costs. Renegotiation permits
comparison of contractors in terms Of
relative performance and leads to re-
wards for performance. Final settle
ment of operating results at periodic
intervals permits settlement for
deliveries under war contracts during
the war period. 1t is believed that full
acceptance by industry of the principle
| OF renegotiation is in its own interest
| as we'll as that of the public"
1t should be noted, the War Depart
ment says, that the s4,747 900 figure
on elimination of excessive profits
through renegotiation does not include
voluntary price reductions, or the saw
lngs which should result from contracts
which may be signed in the future on
the basis of the new prices. Savings
| from both sources" according to the
| (see CONTRACTS, Page C-3J