Evening star., 1943-04-05

justing their David Lawrence.
policies when dealing with the final
prices to be charged the Govern
ment for making munitions.
Recently the Senate committee in
vestigating national defense, headed
by Senator Truman, issued a con-
structive report on the whole re-
negotiation problem and the new
pronouncement by the four war
agencies follows the course outlined
by the committee insofar as it is
practicable at this time
The whole renegotia ton practice
is in an evolutionary stage and it
will take some time to correct all
the delays and overcome the diff
culties inherent in the remaking
of billions of dollars of contracts.
Costs Problematical.
The theory back of renegotiation
is that the Government cannot tell
IN advance-and often the manu-
facturer cannot tell, either-just
what certain munitions making will
cost, so what amounts to tentative
contract is made, subject to renego-
tiation when the production is far
enough along to make a more equit-
able estimate of costs-fair to the
Government and the taxpayers and
fair to the manufacturers.
1t has been argued that excess
profits can be recovered by either
the present high tax rates or even
higher rates, but the Truman COM
mittee wisely points out even though
the amounts refunded would have
been recovered to the extent of
about 80 per cent by taxes, there
are certain instances where per
cent and tax rates do not prevent
excessive profits in particular types
of contracts and where large volume
is involved.
The Truman committee says the
renegotiation procedure can per-
form vital function which in
creased taxes cannot perform-first.
In keeping overall costs at mini
mum as against a tendency to let
costs rise because they are deduct
ible anyway for tax purposes, and,
second, in providing effective incen-
tives to keep production at the
maximum.
Law Change Held Unlikely.
Many able men have been brought
to Washington to carry out the
renegotiation procedures. The work
has been hampered by a belief
among some businessmen that the
law would be changed. The Tru-
man committee warns against any
such probability. The new set of
principles-to be added to as eX-
perience demonstrates the need
gives the first vital step toward uni
formlty Of action by all four agen-
cles dealing with war contracts.
AlC says, III
In considering whether costs or
profits on war contracts are excess
sive, the price adjustment boards
are guided by the following broad
principles:
"'aD That the stimulation of
quantity production is of primary
Importance.
"tb) That reasonable profits in
every case should be determined
with reference to the particular
performance factors present with
out limitation or restriction by any
fixed formula with respect to rate
OF profit, or otherwise.
"lc) That the profits of the con-
tractor ordinarily will be determined
on his war business as a whole for
fiscal period, rather than on spe-
ciflc contracts separately, with the
possible exception of certain con-
ktruction contracts. Fixed price
contracts are negotiated separately
from fees on cost-plus- fixed fee con-
tracts.
"Cd) That as volume increases.
the margin of profit should decrease.
This is particularly true in those
cases where the amount of business