The First Step

For about 18 months the Army, Navy and other war procurement agencies have quick-fingered a hot potato that never grew cool. The problem: How could U.S. war contracts be ended uniformly and quickly so that the industrial plant could speedily shift from one war product to another and reconvert without waste motion at the war's end?

When a solution seemed finally impossible, the hot potato was tossed over to Elder Statesman Bernie Baruch and his assistant, ex-Wall Street Banker John Milton Hancock. The two cooled it off in just two months and two days. Then the Baruch-Hancock combination presented Home Front Czar James F. Byrnes with a contract-cancellation clause, ready-made to fit almost all fixed-fee contracts. Promptly Czar Jimmy ordered it put into effect. Its two main points:

Completed articles will be paid for by the Government at contract prices. Money due on unfinished work may be settled by agreement between the contractor and contracting official. Settlements may contain a "reasonable allowance for profit."

When an agreement on uncompleted work cannot be reached, settlement shall be made on a basis which allows a maximum profit of 6% on articles started, a maximum of 2% on unprocessed inventory.

In the clause no attempt was made to settle what many a big corporation, such as General Motors, considers the No. 1 problem of Reconversion: How quickly will the Federal Government permit its equipment to be hustled out of private plants?

But on that problem Baruch and Hancock are now training their artillery. They hope to work out a plan to let the contractor shunt the equipment out immediately after his contracts are canceled. He may store it at his own risk. Other such knotty problems will be taken up in the same step-by-step fashion. The step that had been taken to unwind the U.S. war machine was a small step--but the important fact was that it had been taken.

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