War Contracts and Profit Limitation

Report Outline
Congress and Profits of War Contractors
Cost-Plus Contracts in First World War
Government Contracts in World War II

Congress and Profits of War Contractors

Clarifying amendments to an act of April 28, 1942, providing for renegotiation of war contracts which allow excessive profits, were included by Congress in the recently approved Revenue Act of 1942. While the amendments were requested by the affected government departments and were believed to be acceptable to war contractors, their adoption was not regarded as constituting final disposition of the question of contract renegotiation or the general question of limitation of profits of war contractors.

Senator Walsh (D., Mass.), chairman of the Senate Finance subcommittee that considered the amendments, told the Senate, October 10, that the Finance Committee, not desiring to delay passage of the tax bill, was recommending acceptance of the perfecting amendments without going into the controversial question of whether or not the contract renegotiation law should be repealed or modified, or whether a substitute should be enacted to impose a specific percentage limitation on profits from war contracts.

Senator George (D., Ga.), chairman of the Finance Committee, said in explaining the conference report on the tax: bill, October 20, that “it was stressed in conference that the whole subject matter of contract renegotiations was before the Ways and Means Committee of the House at this time in connection with a bill introduced, and that the committee would go into the question at a convenient date.” The bill to which George referred, introduced by Rep. Vinson (D., Ga.), October 7, 1941, would limit profits on war contracts to 7 per cent of the cost of performing the contracts.