WAR CONTRACTS

Otago Daily Times, Issue 24700, 1 September 1941, Page 10

WAR CONTRACTS

"COST-PLUS" SYSTEM TIME FOR REVIEW (Air Mail) SYDNEY, Aug. 21. Abuses of the " cost-plus " contract system, under which most of Australia's war industries operate, may force the Commonwealth Government to abandon it for some other method. Originally' the " cost-plus" system was applied to munition annexes attached to privately owned factories, but has been extended to cover most other contracts. Under it, the Departments of Munilions and Supply paid all manufacturing costs plus a "profit, approximately 4 per cent. The way was open for unscrupulous manufacturers to increase their profits by extravagance and inefficiency, knowing that the Government would not only pay for the extra costs, but dividends on them also. The system lent itself to evils and many scandalous stories, no doubt some of them exaggerated, were circulated. Limitations Admitted

The Minister for Munitions, Senator McEride. admittetd the limitations of the system, but defended the Government's use of it from the beginning of the war. He claimed that it was the only means by which the Government could get the volume of work done. Naturally, he said, the small factories could not produce at the same cost as a big industrial concern, but because they could produce the required articles at all was justification for giving them orders. The "costplus" system, he pointed out, was invaluable in establishing new industries, in which the work was often of an experimental nature and therefore not economical at first. Most Labour members are opposed to the system. Dr Evatt. member of the Advisory War Council, said it had "bitten deep into the industrial fabric of the country." and unless drastic action was taken the Australian people would pay heavily for it. But another prominent Labour member, Mr Chifiey, who examined the system closely, said it had been necessary to ensure the production of war materials which had never been made before in Australia. Projected Changes Opinion is general that the time has come for the abolition, or at least curtailment, of the system. It has been in operation for two years, but has always been viewed as an expedient. Much of the report of the Parliamentary Committee on War Production, to be submitted shortly to the Government, will deal with " costplus " and recommendations for the substitution of more economical methods are expected.