REFUND ON WAR CONTRACT

Dominion, Volume 36, Issue 308, 23 September 1943, Page 6

REFUND ON WAR CONTRACT

Minister Replies To Munitions Firm

REFUSAL OF AUDIT OF BOOKS ALLEGED

"The story of the refund of £16.600 to the Government by a munitions contractor is not the story of a generous gesture to the Government, but rather the story ■of a very shrewd move by a company which, after having been pressed for months to come to an agreement with the Governineut as to a lair price, needed to escape from the inevitable reilmtiini of price by making a lump sum payment out of the excess profits on the pretext that that sum resulted from eeoi.onues effected by technical improvements, said the Minister of Supply and -Munitions, Mr. Sullivan, in a statement last night. “‘The Dominion’ says ’the lull -mnry is published’ in their news columns. Hie Editor ought to know better tlinn to take a story from one side and, withoiie giving tlie other side a chance to be beard, rush into print and assert that lie uas published ’the full story,’ “ continued Mr, “This is an exceptional case where private enterprise refused the usual cooperation, insisting .on fixed prices munitions contracts and refusing to < low the books and accounts to be mS| “This contractor does not make the whole grenade—he only makes components valued at about one-sixth ot the whole job. He insisted on G'e Gc'ef ment paying the prices he demaude but it was not till the Mtimtions Depart-, ment began to be suspicious of bis costs and his profits ‘he deadlock arose and he refused to allow Ins books to be said in a recent broadcast that this manufacturer ‘was pant the price that the Government gave him and that ‘he felt that was a higher pnet. than he should be paid for his services. "Payments Stopped." “This,” said Mr. Sullivan, “is entirely incorrect. So far from pressing the con tractor to take the money “'e mum ions officers hud been striving to get an ment as to a fair price. Uns vtov tu in possible the Government finally decided to stop from the periodical paymc-tus a percenfage of (he price contractor. That was in FebruaiJ. IMand since that time no less than Lla.uuu has been withheld. . “Negotiations for an amtcable set ement of the amount in dispute havm„ completely failed (though the confine to was granted interviews withi M n ' and subsequently with the T? Tln’atencd and mvself) the company has tlneatencu to sue'the Crown for further payment. If it does sue, the Government will defend. ‘‘lt will be obvious from Hie above whv the Government was not effusive m its thanks to the firm for ed action’ in refunding ilb.lW in vc cember. 1942. That cheque was very ae rentable but if it had been twice the amount'the Government sidered it a gesture toward a settlement of an outstanding dispute. “As a further illustration of the metll ods of this company—in 1940 "’hen miinb Hons production was just commencing they tendered a fixed price of 2/7 eacn for y mortar bomb tail fins, and as munitions officers considered the plan and facilities were admirably suitable for the work an order was placed. Some Time Inter an increased rate o prodnetion of bombs necessitated more tail units, ami tenders were called This contractor reduced his price to 1/51 each, but a second firm which had never made any before tendered 94d. each, and has proved bv audited production costs that it can produce them at this figure 9he quotation of 1/51 as compared with the accepted price of Md. represented a profit of £10.600 to the first, contractor. “Just one other example of the timeliability of this contractor’s prices and costing data—when Japan came into the war wo needed a small quantity of Sten sub-machine, guns very urgently. Lilis particular ’contractor had the benefit ot the experience of this small order ami when the Government later organized spread production of very much larger quantities the company refused a cost plus order subject to audit and insisted on a fixed price contract. AY hen tenders were called it was naturally expected that with the plant and facilities available and with the experience of the previous order, this contractor would have submitted an unbeatable price. But what hnppeued? For the three components involved they quoted nearly £40,000 more than another firm which had never specialized in mass production engineering. The latter firm got the job, and we know they quoted a fair price as their books and records have been most carefully cheeked. “It is true that the manager of the complaining company made suggestions for increasing the tolerances on sonic component parts ot grenades and backed these up by a demonstration. The official British Government drawings and specifications were thereupon thoroughly examined by the Engineering Panel which had previously been established to advise the army authorities responsible for inspection and the munitions officers responsible for production. Certain amendments were decided on and communicated to all the contractors concerned.

“There is nothing unusual in this procedure.” said Mr. Sullivan. “The Government hits had the wholehearted cooperation and assistance from 99 per cent, of our munitions contractors and almost weekly in.v officers receive and transmit suggestions for improved .efficiency. Some of these suggestions arise from the workers themselves, from foremen, and executives jjud not a few from our own technical staff employed in tlie Munitions Dcpartmen t. “No other contractor has been so difficult as this particular company. The others, almost without exception, have worked with a will, discussed tolerances, methods, layouts, costs and profits quite openly and freely, and this co-operation is the foundation of the Dominion’s successful munitions production. “In the case under discussion it is quite obvious that according to the disgruntled contractor ‘everybody is out of step but him’.”