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Volume 791, November 3 – November 4, 1944
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Volume 791, November 3 – November 4, 1944
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 791
November 3-4, 1944
Regraded Unclassified
- C -
Book Page
Celler, Emanuel (Congressman, New York)
Federal-State relations - Resolution to create
committee on: Treasury-Budget-Celler correspondence
concerning - 11/3/44
791 146
Contracts (War) Terminations and Settlements
Report to Congress, October 1944 - copy sent to HMJr
by Hinckley - 11/4/44
184
Correspondence
Mrs. Forbush's mail report - 11/3/44
128
- 1 -
Eisenhower, General Dwight D.
See also Post-War Planning: Germany
Books of specimens of various currencies and stamps for
occupied territories prepared by Treasury - 11/3/44
109
a) Thanks HMJr - 11/12/44: See Book 794, page 1
- 7 -
Federal-State Relations
See Celler, Emanuel (Congressman, New York)
Foreign Funds Control
Mexico: Regulation permitting Americans to carry only
$2 bills into country - - White memorandum, and Schmidt
memorandum to State Department - 11/3/44
154
France
American Banks in Paris: Five designated as Government
depositories; official use clarified for War Department -
11/3/44
153
American Banks: Activities of French branches during
German occupation - investigation of now under way,
War Department is told - 11/11/44: See Book 793. page 261
- G -
Germany
See Post-War Planning
Glasser, Harold
See United Nations Relief and Rehabilitation Administration
- L -
Latin America
Mexico: See Foreign Funds Control
Regraded Unclassified
- L - (Continued)
Book
Page
Lend-Lease
United Kingdom
Phase 2
See also Book 790
Non-military items for export and re-sale - FDR denies
story - 11/3/44
791
100
a) Henry J. Taylor broadcast - 11/6/44:
See Book 792. page 43
b) Foreign Economic Administration's attitude
reviewed by Currie - 11/13/44: Book 794,
page 30
Aircraft flight delivery as at October 31. 1944 -
British Air Commission report - 11/4/44
299
- M -
Mexico
See Foreign Funds Control
Morgenthau, Henry, Jr.
Proposed book on demilitarization of Germany:
See Post-War Planning (Germany)
- P -
Post-War Planning
Germany
Proposed book on demilitarisation: Conference; present:
HMJr, Glasser, Schmidt, Pehle, Luxford, DuBois, and
Gaston 11/3/44
5
a) Table of contents
24
b) McConnell memorandum on assignment of proceeds
to Red Cross
28
Eisenhower statement of warning against bestial
treatment in concentration camps: Text, FDR's
memorandum to Stimson urging speed, and Pehle
resume' - - 11/3/44
103
a) Eisenhover's statement - 11/8/44:
See Book 792. page 155
British directives covering Germany and Austria in
post-surrender period returned to McCloy - - 11/3/44
111
- R -
"Rainbow" (Motion Picture)
See U.S.S.R.
Renegotiation Act
See War Contracts Terminations and Settlements
Regraded Unclassified
- T -
Book Page
Taylor, Heary J.
See Lend-Lease: United Kingdom (Phase 2)
- U - U -
U.S.S.R.
Motion picture "Rainbow"
McCloy-HMJr conversation - 11/3/44
791
37
Gromyko-HMJr
:
- 11/3/44
39
Skouras-HMJr
- 11/14/44: See Book 794,
page 162
United Kingdom
See Lend-Lease
United Nations Relief and Rehabilitation Administration
Glasser, Harold, made permanent U.S. representative
on Committee on Financial Control - 11/3/44
157
- W -
War Contracts Terminations and Settlements
Report to Congress, October 1944 - copy sent to HMJr by
Hinckley - 11/4/44
184
Renegotiation Act - termination date, extension of:
Recommendations to FDR from Secretaries of War, Havy.
and Treasury; Reconstruction Finance Corporation; War
Shipping Administration; Maritime Commission - 11/10/44:
See Book 793, page 114
a) Hinckley's accompanying letter - 11/13/44:
Book 794. page 62
FDR signs proclamation "Specification of Termination Date
as provided in Renegotiation Act" - 11/15/44: Book 795,
page 123
Regraded Unclassified
1
November 3, 1944
9:02 a.m.
HMJr:
Frank, I had them contact you in regard to this
request for the English.
Frank
Coe:
Yes.
HMJr:
Now, Lord Keynes and Sir Robert Sinclair are
coming here at ten and
C:
That's right.
HMJr:
I asked you to be here then.
C:
Yes, sir.
HMJr:
Now, what's this other thing that they want?
C:
Well, they finished the -: they've finished the
aircraft program, both Navy and Ground Air
....
HMJr:
Yes.
C:
and I understand they sent it over to your
office with agreement
HMJr:
I -- now, that's from the Army?
C:
From the Army -- and the Navy Air 1s in there, too.
HMJr:
Is it? Well, I -- I gave it
C:
I haven't seen it yet.
HMJr:
Well, I gave it to Casaday.
C:
All right. Fine. We'll get it from him. And we --
the British apparently want to have in the spirit of
-- want to get together in the spirit of showing the
urgency of this thing and have, apparently, a little
statement from the Army and yourself and themselves
and they may have something else that they want to
raise but I couldn't get it out of Sinclair if they
do. Both Gates and Lovett are out of town.
HMJr:
Yeah.
C:
And I got in touch with one of -- one of the --
Judge Patterson will be there if necessary. I told
him that it seems that it was by way of being a kiss
and a blessing. The working -- the working people.
Regraded Unclassified
2
- 2 -
C:
Cont'd
on the -- on the Army and Navy sub-committees
told me they didn't see any need for a meeting,
but there may be some questions of higher policy
that they want to raise. If 80, Sinclair didn't
commit himself.
HMJr:
Well, now, how are we going to do this? Lord
Keynes and Sir Robert are coming at ten. If
we're going to meet, the Americans should meet
first because late last night in came a. letter
from Forrestal to me
C:
A letter from Forrestal?
HMJr:
....
on the Navy
C:
Is that so?
HMJr:
which he wants me to see first.
C:
I see, well, Mr. -- Oh, well then, Mr. Secretary,
the -- we had set up the sub-committee meeting on
the American side for two-thirty
HMJr:
Yeah.
C:
and a combined sub-committee for three-
thirty. Now, tentatively yesterday in talking
with Sir Robert Sinclair, we agreed that if it
would suit you, we'd have the British come in on
the -- on the -- on the full-crop meeting at
three o'clock.
HMJr:
Well, today is supposedly Cabinet but they haven't
let me know. I think it's a three-to-one bet there
won't be.
C:
Three-to-one bet there won't be.
HMJr:
No.
C:
What time -- what time
....
HMJr:
Cabinet is -- you've got to count on it from two
to four.
C:
Two to four. Yeah.
Regraded Unclassified
3
M I I
HMJr:
I could have it at four and run the thing from
four to five.
C:
Could we -- could we set up the meeting with
the British at four
HMJr:
Yes.
C:
and ask the Americans to come at three
and if they're not there you have someone else
HMJr:
No, I don't think we quite understand each other.
I should think the Americans should meet first.
C:
Yes, sir. But I said three
HMJr:
For Americans?
C:
Three for the Americans and four for the British.
HMJr:
Well, that would be all right.
C:
And then if you -- if the Cabinet should come
and
HMJr:
Just delay it an hour.
C:
That's right -- or you could ask Harry or someone
to handle the Americans.
HMJr:
Yeah -- but -- no, I'd kind of like to be there.
C:
Oh, you would? Well
....
HMJr:
I -- I think -- I think by not later than ten-
thirty when General Watson sees the President --
I think that by that time I'll know. I'll know
by the time -- when Lord Keynes 18 here at ten --
and you're here.
C:
Well, Mr. Secretary, we could do one other thing --
we could set the Americans at four and I suppose
the British at five. That's getting a little
late.
HMJr:
It's getting late because I want to leave this
afternoon.
C:
Well, then let's not decide it until -- until
ten-thirty when we are over there.
Regraded Unclassified
4
- 4 -
HMJr:
Why don't We do it that way?
C:
Okay, then.
HMJr:
Now, I'll get this thing to Casaday -- the
British Navy thing and -- so he can, in turn,
give it to you. I mean, the American Navy.
C:
Yes, and tell him I'll pick it up when I'm over
there.
HMJr:
Okay.
C:
Thank you, sir.
HMJr:
Thank you.
Regraded Unclassified
5
November 3, 1944
9:15 a.m.
PROPOSED BOOK ON GERMAN DE-MILITARIZATION
Present: Mr. Glasser
Mr. Schmidt
Mr. Pehle
Mr. Luxford
Mr. DuBois
Mr. Gaston
H.M.JR: What do we do with the Krock story?
MR. LUXFORD: They will blow that up.
H.M.JR: He has just been holding that. Then this
thing of Acheson yesterday calling up about Mr. Opie
wanting to see Mr. Twitty of the Tribune. Well, the
Tribune has nothing. I don't believe that the Tribune and
Krock would work together.
And the worst thing of all is (reading from article
by Arthur Krock in the New York Times of November 2):
"The negotiations began at Quebec with the arrival of
the Secretary of the Treasury, Henry Morgenthau Jr., who
took along his post-war plan for an agrarian, non-indus-
trial Germany after the war. As reported by this
correspondent at the time, Mr. Morgenthau's favorable
attitude toward the British lend-lease proposal brought
from them in return encouragement of his German plan."
The only person who raised the question of which came
first was Mr. Stimson.
MR. DuBOIS: It wasn't very clear before.
H.M.JR: No, but you felt that he knew.
Regraded Unclassified
6
- 2 -
MR. LUXFORD: I sensed that he knew. I was just
waiting for him to spring the Quebec agreement.
H.M.JR: (Continuing) "No representative of the
Foreign Economic Administration, which under Leo T. Crowley
directs lend-lease, was invited to Quebec either, and this
agency became a willing ally of State and War with the
objective of shelving the Treasury post-war German plan
and returning direction of the subsequent negotiations
with the Keynes delegation to State, war, and FEA."
How Arthur Sulzberger, who wants to see the President
elected, can run a story like that! Anyway, I don't think
there is a thing to do.
MR. PEHLE: No, I should say the trouble is, will it
stop there?
H.M.JR: Today is Friday. Dewey can use it tonight
or tomorrow.
MR. LUXFORD: Sure, Joe tells me the President is
planning to speak on Monday.
MR. DuBOIS: Isn't that what Lubin told you?
Mit. PEHLE: Yes.
H.M.JR: Where?
MR. DuBOIS: Hyde Park, I think.
MR. PERLE: He said on Monday - on human rights.
H.M.JR: The only place he might talk would be
Poughkeepsie at five or five-thirty.
MR. DuBOIS: He usually talks every Election Evening,
doesn't he, Mr. Secretary?
H.M.JR: The last I heard he hadn't been planning to
do it, but maybe he has changed his mind.
Regraded Unclassified
7
- 3 -
MH. DuBOIS: They had the space reserved from nine to
ten, and Dewey has one after it.
H.M.JR: Now, what about this book?
MR. LUXFORD: I think we can show you the outline,
first, Mr. Secretary. (Refers to attached copy of
Table of Contents)
H.M.JR: Did you men see what George Hall of the
Foreign Office said yesterday in Parliament? "The Govern-
ment spokesman indicated in Commons that the British Govern-
ment favored confiscating some if not all of the modern
equipment of German factories after the war and prevent
the Germans from rearming for another conflict.
MR. PEHLE: Very good. You would never guess that
from the Directive you read.
H.M.JR: This is the proposal here? (Refers to
attached Table of Contents)
MR. LUXFORD: It is a working draft, Mr. Secretary.
H.M.JR: Do you people have the argument against
the supervision to show how when they had control after
eleven years the last control disappeared?
MR. DuBOIS: Chapter X, for example.
MR. GLASSER: I have a draft of that chapter - In-
adequacy of Military and Economic Controls.
H.M.JR: Do you tell how the control worked last time?
MR.GLASSER: Yes.
H.M.JR: In the Times where this fellow took up one
point after another and showed the last control disappeared
after eleven years.
MR. GLASSER: There is a whole section here on the
failure of Allied controls after the last war.
Regraded Unclassified
8
- 4 -
H.M.JR: Personally, I think that that ought to be
right up to the front - I haven't got much time this
morning - to show why, if we follow the same pattern of
controls, why they didn't work and why they won't work
again.
MR. LUXFORD: I don't think we had focused in terms of
chapter order. We were thinking more in terms of these
being chapters that must be covered and we would wait until
we got the chapters.
H.M.JR: I was just thinking out loud. I am more and
more impressed that these people think you can do the thing
through the control. I think the first idea is you have to
knock that down.
(Mr. Gaston enters the conference)
H.M.JR: Hello, Herbert, come in. These boys have
been working on a book to go out over my name on the day
that Germany collapses. I am just taking a look at it.
One of my thoughts was that the fund should go to the
American Red Cross, and then we might get these vast
volunteer organizations to stimulate the sale of it if
they knew that every time they sold a book 30 much went to
the Red Cross.
MR. LUXFORD: I think the Book of the Month ought
to put this out.
MR. GASTON: You might at least talk to Harry Scherman
about it and get some advice. Whose signature is it going
to be?
MR. LUXFORD: The Secretary's.
MR. GASTON: That makes it pretty official. You would
have to have consent.
H.M.JR: I am going to do it with or without consent.
Regraded Unclassified
9
- 5 -
MR. DuBOIS: It can be just Henry Morgenthau, Jr.
You don't have to say Secretary of the Treasury.
H.M.JR: Harry Ickes got his out with or without. I
don't care. This is going to go with or without consent.
MRS. KLOTZ: You mean you are going to ask for consent
and then if you don't get it you are going to do it anyway?
H.M.JR: Yes, Mrs. Klotz.
MRS. KLOTZ: You mean this happens after Elections?
H.M. JR: This happens the day after Germany collapses.
MR. GASTON: This book may come out - the distinction
Joe DuBois made is a very good one - it may come out with
the signature of Henry Morgenthau, Jr., but not as
Henry Morgenthau, Jr., Secretary of the Treasury.
MR. PEHLE: He wouldn't put Secretary of the Treasury.
I don't think it makes any difference.
MR. GASTON: He wouldn't be Secretary of the Treasury
when the book came out, is the thing I am saying.
MRS. KLOTZ: Oh, ho, ho.
H.M.JR: That is something else again. I am saying
that with or without consent that I am prepared to put my
name to this book the day after Germany collapses.
MRS. KLOTZ: I have to make this absolutely clear.
I say that it is important for you to put it out without
asking for their consent. That you would do, you see. But
once you ask their consent--
H.M.JR: No, I will mention it to the President. I
will say to the President, "I am going to publish a book on
how I think Germany should be treated, to be released the
day after Germany collapses."
Regraded Unclassified
10
- 6 -
MRS. KLOTZ: And if he says, no, you put it out
anyway.
H.M.JR: That is right.
MRS. KLOTZ: I will bet you two bucks.
H.M.JR: No, one buck - and I am giving you even
money!
Anybody else want to bet?
MR. PEHLE: I will bet a dollar.
MR. LUXFORD: I am not going to bet against interest.
H.M.JR: What about Gaston?
MR. GASTON: I am like Ansel, I don't want to corrupt
myself. I am still an amateur.
H.M.JR: Well, anyway, two bucks it is. I will have
to think of some good reason why the book isn't published.
Of course, that goes if the book isn't good enough.
MRS. KLOTZ: Mr. Pehle and I hope, we hope.
H.M JR: You heard what Gaston said - I wouldn't be
Secretary of the Treasury. That is all right.
MR. LUXFORD: I will take a bet on that, too - that
you will be!
H.M.JR: Anyway, at least I am encouraging you to go
forward. Is that right?
MR. GASTON: I think the book should come out under
somebody's signature.
H.M.JR: Where do you treat of what you are going to
do with the population of the Rhur?
Regraded Unclassified
11
- 7 -
MR. GLASSER: There is one section here on what is to
happen to the German people.
MR. DuBOIS: Chapter XII.
MR. GLASSER: "The future of the German people under
this program."
H.M.JR: I would like to take this with me. It looks
very comprehensive. Now, I think this. Who is going to
approach a publisher on this?
MR GLASSER: Well, Harry thought that we would first
get up the material in whatever shape it is in and then
turn it over to some professional craftsman to go over it;
and after he has gone over it and we have checked it, and
if you agree to go ahead, then you can get in touch with
the publisher and perhaps have another professional go
over the thing for the last time.
H.M.JR: Have you got a professional in mind?
MR. GLASSER: Not yet, but there are a number of them.
MR. LUXFORD: I was just thinking of men like Stout,
and that crowd.
MR. PEHLE: Fadiman.
MR. DuBOIS: Sam Grafton would be an excellent writer.
H.M.JR: Has he written a book?
MR. GLASS R: He has published a collection of daily
essays.
MR. PEHLE: Writes very well. Fadiman would be a
very good man.
H.M.JR: If you knock it about too much, you know--
MR. PEHLE: That is why I think it is early to do
anything until you are very near the time.
Regraded Unclassified
12
- 8 -
MR. DuBOIS: I think we here in the Treasury can
do & pretty good job, myself.
MR. GLASSER: You want to get the professional touch
on the writeup.
H.M.JR: These things take a lot of time, until they
get it typed, and all that sort of thing. Somebody might
ask Internal Revenue - Herbert, you might - what is the
arrangement that Stettinius had on his book. All his
revenue and royalties went to the Red Cross, I know.
Just how did he do that?
MR. GASTON: lie had an arrangement whereby it didn't
accrue to him by revenue, and that is done by letting
the Red Cross be the publisher.
MR. PEHLE: Came up here, didn't it, Mr. Secretary?
H.M.JR: No, that wasn't true in Stettinius' case.
MR. LUXFORD: Willkie made his arrangement with Crowley
as the trustee, and then divided the funds between the
Chinese, Russian, and American Red Cross.
MR. PEHLE: Morris Ernst would know the whole thing,
how to do it. He was in the Willkie picture.
MR. LUXFORD: Also Phil Wenchel.
MR. GASTON: There are several ways to do it. I
don't imagine that the income from the Stettinius book was
very great.
H.M.JR: Yes, I heard him say two or three months
ago, either eighteen or twenty-five thousand dollars.
MR. GASTON: I don't know how big his personal income
is. One way is to let it fall within the fifteen percent
if it isn't too big. The other way is to contract before
publication.
Regraded Unclassified
13
- 9 -
H.M.JR: I want to contract before publication.
MR. LUXFORD: We are expecting a best seller out of
this; with your name on it and this plan it ought to be
a best seller.
MR. DuBOIS: It is not just a book.
H.M.JR: Have you boys looked at Vansittart's book?
MR. LUXFORD: No.
MR. PEHLE: Recent?
H.M.JR: Yes, he has written several.
MR. GASTON: Yes, there will be a large sale.
MR. LUXFORD: You have the best advance publicity.
H.M.JR: Then I said doing it through the Red Cross,
all the Red Cross chapters can peddle it if they know they
are getting twenty-five or forty cents for the local chapter.
That would be the way to do it.
MR. GLASSER: I should think it would be better to get
a low price SO you could get a wide distribution.
MR SCHMIDT: One of these twenty-five cent editions.
H.M.JR: A dollar.
MR. PEHLE: And not too long a book.
H.M.JR: Who did Willkie's book - I mean, who published
it?
MR. GASTON: Simon and Schuster.
H.M.JR: These publishers keep these things very
secret, too.
Regraded Unclassified
14
- 10 -
MR. GASTON: Harry Scherman could give a lot of good
advice because he knows the technical game very well and
he is not committed to any one publisher.
H.M.JR: You hope!
MR. GASTON: I know he isn't, as a matter of fact.
H.M. JR: Well, let me read this thing. As I say, I
am just throwing out a few suggestions. I am delighted,
notwithstanding Mr. Pehle's and Mrs. Klotz' and Mr. Gaston's
doubts that I will not be Secretary of the Treasury when
it comes out. You people have to be prepared for a lot of
new things from me after Election and this is one of them.
I am going to evaluate where I can do the most good.
MR. LUXFORD: I am glad to hear you say that because
I think there is a second book that should be published
and that is the program that we drew up for post-war.
H.M. JR: Oh, yes.
MR. GASTON: The economic program.
MR. LUXFORD: It is one that is needed. We can hold
that one off until we get this one under way.
H.M.JR: We are talking here very confidentially -
no, Pearson isn't there--
MR. GASTON: Arthur Krock is the one to look for.
H.M.JR: The funny story that McCloy told last night
was that somebody went to a Cabinet meeting and they said,
"Now, this is very, very confidential." And the President
looked around and said, "Well, after all, there is no use
being confidential because, after all, Pearson sits right
here at the Cabinet!" There are two sources he has at
Cabinet, one is wallace and the other is Ickes.
MR. LUXFORD: Just two?
Regraded Unclassified
15
- 11 -
H.M.JR: Only two that I know about! (Laughter)
M. GASTON: I know of another one. Another one
is Cordell Hull. Cordell Hull tells people in the
State Department who will tell Pearson.
H.M.JR: Are you being funny? He is so terrifically
anti-Hull.
MR. GASTON: Sure, but he has excellent sources in the
State Department.
MR. LUXFORD: There is a pipe-line, too, to FEA.
MR. PEHLE: The article this morning suggests that
Dewey has had experience as an agriculturist, and ne says
Bricker, when he got out of college during the last
war, after an athletic career, was ordained as a chaplain
in one day.
H.M.JR: Did you find something in Krock's article?
MK. DUBOIS: No, it wasn't here, Mr. Secretary.
MR. GASTON: Krock's first-page story is the story.
H.M.JR: Herbert, you see, there was some monkey-
business going on yesterday - this business of Acheson
calling up so unctuously, and so worried about Twitty
of the New York Tribune going up to see Opie at the British
Embassy--
MR. GASTON: What happened there was, I think Twitty -
I think the Herald Tribune bureau got an intimation some-
how that Krock was coming out with a story and they tried
to get it and were not successful. But nothing that we
would have put out in the way of a formal release would
have done anything whatever to head off Arthur Krock - it
might even have tended to stimulate. It wouldn't have
done any good. But, of course, he has had the story told
to him by FEA or State - probably FEA.
(The Secretary takes a call from Mr. Stettinius as
follows)
Regraded Unclassified
16
November 3, 1944
9:50 am
HM Jr:
Hello?
Operator:
All right. Go ahead.
HM Jr:
Hello?
Edward
Stettinius:
Hello, Henry.
HM Jr:
Good morning.
S:
How are you, sir?
HM Jr:
Oh, mad!
S:
Well, now I want to go on record with you that
nobody from here has talked to Krock. I carried
on a quick survey this morning, and no information
was given to Mr. Krock from the State Department.
HM Jr:
Well, needless to say nobody here would give him
that kind of a story.
S:
Now, Dean tells me that the British Embassy phoned
yesterday that the Times, Herald Tribune men were
up there, and that he talked to you and you thought
they ought to be referred to Oscar.
HM Jr:
That's right.
S:
Yes.
HM Jr:
No, he didn't tell me about the Times man. He told
me that Twitty of the Tribune was up there.
S:
Well, the Times man was there, too.
HM Jr:
Well, he didn't tell me that.
S:
But see Krock has got the whole works there. It's
complete from start to finish.
HM Jr:
No, Acheson didn't mention the New York Times' man.
He just said Twitty of the Tribune.
S:
Yes. Well, Acheson said that a Times and a Herald
man were at the Embassy, and they wanted to know
what to do.
HM Jr:
Well I think this, Ed. I think Krock has had this
0
thing right from the beginning, see?
17
- 2 -
S:
From the British?
HM Jr:
I don't know where. No, no - no, no. I think he
has had this whole business right from the beginning -
there was some article he wrote earlier right after
I came back from Quebec which indicated that he
knew something about this Lend-Lease, and that he
has been holding this until now to make it politically
as bad as possible. But there was something he wrote
right at the beginning which indicated to me
S:
That he knew about the Lend-Lease.
HM Jr:
That he knew about the Lend-Lease stuff, too.
S:
I have spent a lot of time in the Department since
we had lunch and, Henry, I just can't believe that
one of our boys has done any dirty work. I really
can't believe it. And I've grilled lots of them
right in my office alone.
HM Jr:
Well, of course, I'm sick of it only for one reason,
and that is in case it may have some bad effect on
the President.
S:
I don't think it will.
HM Jr:
What?
8:
I don't think this will.
HM Jr:
Well, the inference is so dirty - that we bought
the British sympathy for Germany through
....
S:
Liberalized Lend-Lease.
HM Jr:
That's right.
S:
Yes.
HM Jr:
That's the dirty inference.
S:
I Know.
HM Jr:
Incidentally, while I have you on the wire I think
I had some one call your office. There is a man
by the name of Hall who is Under Secretary of the
Foreign Office, and he made a very good statement
in Parliament yesterday.
Regraded Unclassified
18
- 3 -
S:
Yes, I have it before me.
HM Jr:
Hello?
S:
Yes.
HM Jr:
What - my request?
S:
Yes. I got your note early.
HM Jr:
Oh, yes. I thought we might get the full text of
his statement.
S:
Well, I will send the full text to you the moment
it is received.
H Jr:
Will you do that?
S:
It might though - - sometimes they come by airgram,
and it might not be until this evening, but we
will get it to you certainly within the next day
or two.
HM Jr:
Now one other thing in a round-about way I heard
that Mr. Roosevelt wrote Mr. Hull here recently
about treatment of the Germans - short and long
distance treatment of them, and military treatment.
Are you familiar with the letter that he wrote?
S:
Not recently. Not since he has been not since
I have been Acting.
HM Jr:
Well, I gather that it was within the last week
or ten days.
S:
A letter from
.....
HM Jr:
The President to Mr. Hull.
S:
The President to Mr. Hull.
HM Jr:
And you furnished a copy of it to the Army. Hello?
S:
Yes.
HM Jr:
I wasn't furnished a copy of it.
Regraded Unclassified
- 4 -
19
S:
Well, let me look right into it.
HM Jr:
Will you?
S:
I will.
HM Jr:
Please.
S:
I will, sir.
HM Jr:
And I did ask - yesterday I only heard about it -
I did ask Grace if she would look it up, but
....
S:
A letter from the President to Mr. Hull on the
long and short-term treatment of Germany.
HM Jr:
Of Germany.
S:
Right away.
HM Jr:
Would you?
S:
I will, and you shall have a copy.
HM Jr:
Thank you.
S:
And both early and often.
HM Jr:
I did ask Grace, but she couldn't locate it.
S:
Well, leave it with me - I will get it.
HM Jr:
Would you?
S:
Yes.
HM Jr:
Because I take it that Committee at least is still
standing.
S:
Thatta Boy !
HM Jr:
Now have you seen the English Handbook?
S:
No.
HM Jr:
You haven't?
Regraded Unclassified
20
5 I I
S:
The English Handbook on Germany?
HM Jr:
Yes.
S:
No.
HM Jr:
Well, we have analyzed that, and I would like to
send you a copy of our analysis.
S:
All right. Okay, old boy.
HM Jr:
Thank you.
S:
I'm going to see - I'm going to call Harry White
and tell him he can come over any time today at
his convenience.
HM Jr:
Well, he doesn't get in until around 11:00.
S:
Well, I will leave word with his office.
HM Jr:
Well, I appreciate your calling me, but this
S:
I know.
HM Jr:
Believe me, I will take your word for it.
S:
Well, I am still going to work.
HM Jr:
Well, I am, too, but you see on the 29th - have you
got just a minute?
S:
Yes.
HM Jr:
This is the 29 th of September - Krock said,
"This correspondent was informed today that the
British lent an interesting ear to descriptions
of the beneficial affect on their hard-pressed
economy if Germany were turned into an agricultural
nation. The British Lend-Lease debit with us now
is six or seven billions.' Now if you want to send
for it - it is Krock's story in the Times of the
29th.
8:
Krock's story in the Times of the 29th.
Regraded Unclassified
21
- 6 -
HM Jr:
And in that thing he tips his hand that he did
know about what he wrote today. I am convinced
that he knew that on the 29th.
S:
All right, boy.
HM Jr:
So it goes back to that.
S:
Thank you, sir.
HM Jr:
Thank you. Are you looking up that letter from
the President to Hull?
S:
Yes, I'll go right after it.
HM Jr:
Thank you.
Regraded Unclassified
22
- 12 -
MR. LUXFORD: Mr. Secretary, you can assume that he
has the Quebec agreement.
MR. GASTON: This story of Krock's is not a one-day
story - something that he has written in a hurry; that is
something he has spent some time on.
MR. LUXFORD: He is playing trumps.
MR. GASTON: This Herald Tribune inquiry sprung from
a leak that Krock was about to spring something. The
Times man going along was a cover-up to see what they
could pick up directly. That is quite orthodox.
NH. GLASSER: Isn't there something in the Krock story
this morning that indicates he has had recent information?
H.M.JR: Yes - "There is belief that Mr. Morgenthau
received encouragement at Washington as well as Quebec."
MR. GLASSER: That looks as though that was written
from the part of the book that spoke of the interest in
England of having Germany de-industrialized.
H.M.JR: "These advantages of the Morgenthau plan
helped to improve the advantages and prospects of the
United Kingdom. At any rate, some of the British are
said to have been impressed by the advantages of the plan."
Definitely, he knew it then. Oh, hell!
MR. LUXFORD: You can start out on the basis that
once he knew as much as he did, nobody was going to hold
back the rest.
H.M.JR: McCloy said, "I had the letter from the
President to Hull in my hand yesterday" - he was over here
two days ago - "but," he said, "I didn't feel I had the
right to show it to you, but, in effect, I am telling you
this letter is in existence.
Regraded Unclassified
23
- 13 -
I want to say this in behalf of McCloy: After all,
if I have any success as Secretary of the Treasury it is
my judgment of human nature, and I don't think McCloy
would go out and deliberately cut my throat.
MR. LUXFORD: Mr. Secretary, I might agree with you
if you say cut your throat; nevertheless, I sat in the
CCAC meeting when he was blessing the British as much as
he was you, on their book.
H.M.JR: But I still say I don'tthink he would stab
me in the back.
MR. LUXFORD: No, but he agrees with whoever is with
him.
MR. DuBOIS: Whoever is doing this is not only interested
in stabbing you, but they are interested in stabbing the
President.
H.M.JR: Well, I have my own guess.
MR. GLASSER: You don't think it came out of Edmonton,
Canada, on the Lend-Lease.
H.M.JR: No, I think this is Cordell Hull, and I have
always thought so, in view of the way he talked that day
when I came back, and nothing can make me change. They
can't find out asking around there.
I was at dinner and I saw Arthur Krock walking with
his arm around the waist of Cordell Hull.
MRS. KLOTZ: It sounds awful.
H.M.JR: And Cordell Hull didn't push him away because
he didn't want to hurt his feelings. He is that kind of
a person.
Regraded Unclassified
24
TABLE OF CONTENTS
CHALLENGE wo THE AMERICAN PEOPIE
INTRODUCTION
CHAPTER I - THE GERMAN PROBLEM AS A GREAT CHALLENGE TO
THE AMERICAN PEOPLE
CHAPTER II - THE REAL ISSUES
(a) If we give Germany a chance, she will
plunge the world into another war.
(b) German militarism can not be destroyed
by destroying Nazism alone.
(c) To destroy German militarism de must
destroy Germany's war-making potential.
(a) The core of Germany's war-making
potential is German industry.
CHAPTER III - THE FALSE AND WAR-BREEDING POSITION THAT WE
NEED A STRONG GERMANY AS A BULWARK AGAINST
RUSSIA
CHAPTER IV -- AN ANTI WORLD WAR III PROGRAM FOR GERMANY
(a) In General
Each point of program should be considered
in relationship to the whole program, but
this does not mean that every point must be
adopted in order for program to succeed.
Point (b) and Point (8), however, are both
regarded as absolutely essential to success.
(b) Demilitarisation of Germany
This includes the removal or destruction of
all war material and the whole German
armament industry.
25
# 2 .
CHAPTER IV (Cont'd)
(e) Elimination of heavy industries
The metallurgical, chemical and electrical
plants and equipment in the Ruhr and in the
rest of Germany must be removed or destroyed.
(a) Internationalization of Ruhr
The Ruhr and surrounding industrial areas
(including the Rhineland, the Kini Canal,
and all German territory north of the Kiel
Canal) should be made an international zone.
(a) New boundaries of Germany
Poland should get East Prussia and the
southern part of Silesia.
France should get the Saar and the adjacent
territories bounded by the Rhine and the
Moselle Rivers.
Netherlands should get
Belgium should get
(f) Partitioning of new Germany
The remaining German territory should be
divided into a North German state and a
South German state, with a customs union
between the South German state and Austria.
(g) Political decentralisation
The decentralization of the political structure
of Germany should be promoted.
(b) Economic restoration to United Nations
More fully developed in Chapter VII
(1) Controls over development of German commy
More fully developed in Chapter VIII
Regraded Unclassified
26
- 8 -
CHAPTER IV (Cont'd)
(1) Education and propaganda
All schools and universities should be
closed until an Allied Commission has
formulated an effective program.
(k) Punishment of war crimes and treatment
of special groups
More fully developed in Chapter XI
(1) Agrarian program
All Junker estates should be divided
among peasants.
(m) Other measures
(1) Placing responsibility for local German
economy on German people.
(2) Prohibiting uniforms and parades.
(3) Prohibiting possession and operation
of aircraft.
CHAPTER V -- THE FALLACY THAT EUROPE NEEDS A STRONG INDUSTRIAL
GERMANY.
A healthy European economy never was and need
never be dependent upon German industry.
German industry has in the past prevented the
growth of industry in Europe as & whole.
CHAPTER VI - RECURRING REPARATIONS MEAN A POWERFUL GERMANY
Large-scale recurring reparations requires
immediate reconstruction of the German economy.
Liberated Europe would become economically de-
pendent on Germany.
The payment of reparations is directly competitive
with the export 13 industries of the United States,
the LMC [ Irance world create
political dissensions the United
Reg aded Unclassified
27
- 4 -
CHAPTER VI (Cont'd)
The United States, which would get no
reparations, would bear a large share
of the cost of reconstructing Germany--
If we are to help our Allied, let's do
it directly and not through the device
of building up Germany.
CHAPTER VII -- ECONOMIC RESTITUTION BY GERMANY TO THE
UNITED NATIONS.
(a) Transfer of German territory.
(b) Removal and distribution of industrial
plants and squipment.
(c) Restitution of looted property.
(a) Forced German labor.
(a) Confiscation of German assets outside
of Germany.
CHAPTER VIII -- CONTROLS OVER DEVELOPMENT OF GERMAN ECONOMY.
CHAPTER IX - THE FALLACY THAT A "SOFT" PEACE WOULD FACILITATE
THE GROWTH OF REAL DEMOCRACY IN GERMANY.
CHAPTER X -- DEMILITARIZATION OF GERMANY AND ESTABLISHMENT OF
MILITARY AND ECONOMIC "CONTROLS" WILL NOT INSURE
PEACE.
CHAPTER XI - PUNISHMENT OF WAR CRIMES AND TREATMENT OF SPECIAL
GROUPS.
CHAPTER XII - THE FUTURE OF THE GERMAN PEOPIE UNDER THIS PROGRAM.
CHAPTER XIII - RELATIONSHIP OF PROGRAM TO WORLD SECURITY ORGANIZATION
CHAPTER XIV - PARTICIPATION OF UNITED STATES TROOPS
CONCLUSION
Regraded Unclassified
TREASURY DEPARTMENT
Hom paur 28
INTER OFFICE COMMUNICATION
Secretary Morgenthau
Date
November 3, 1944
TO
Mr Gaston
FROM Mr. O'Connell
The simplest, and I believe best, way of
seeing to it that the proceeds of any literary
work go to the Red Cross, or some other charitable
organization (undiminished by any income taxes
that might otherwise be payable by the author),
is for the author to assign all of his right, title
and interest in the manuscript to the charity before
he has made a contract for its publication with the
publisher.
w
BON
Regraded Unclassified
29
November 3, 1944
10:10 a.m.
BRITISH LEND-LEASE NEGOTIATIONS
Present: Lord Keynes
Sir Robert Sinclair
Mr. Lee
Mr. Coe
Mr. Casaday
H.M.JR: Did you people see the very unpleasant
story of Mr. Krock's in the paper this morning?
MR. LEE: Yes, I did.
LORD KEYNES: I haven't seen the New York Times.
H.M.JR: The inference in the story is that I have
influenced you people to do something about Germany
through promising you Lend-Lease. That is all!
LORD KEYNES: Heavens, no! I didn't see that.
H.M.JR: That is all! But he has had this story,
I am confident, for over three weeks, because we went back
to a story he wrote on September 29 in which he referred
to the thing then.
Incidentally, I was very much pleased at what the
so-called Under Secretary for the Foreign Office, a
Mr. Hall, said in Parliament yesterday. He made a state-
ment about Germany. He said he thought they ought to take
most of the machinery out of Germany that had to do with
heavy industry. He was speaking for the Government. I
have asked for the full text. What position does he
occupy?
Regraded Unclassified
30
- 2 -
LORD KEYNES: It is a new post. When Dick Law
was made Minister of State - he was previously a
Parliamentary Under Secretary - they duplicated the
office and made an additional office. Hall, who was a
Labor man, in a sense, holds the post that Dick Law
held. he is Parliamentary Under Secretary.
MR. LEE: He was in the Admiralty before.
H.M.JR: Did you see the statement?
MR. LEE: No, sir, I didn't.
H.M.JR: Well, now, you asked for this appointment.
Do you have something in mind?
LORD KEYNES: It rises out of the deadlock we seemed
to have reached with the Navy Department.
MR. SINCLAIR: it is not a declared deadlock,
Mr. Secretary. The position is that, if you remember,
the Navy Department asked a pretty complete series of
questions.
-
(Mr. Casaday enters the conference)
H.M.JR: Pardon me. (To Casaday) I sent in the
letter from the Navy Department. Do you have it?
MR. CASADAY: Yes, I have a photostat.
H.M.JR: Well, I will get the original. It came in
late last night.
MR. SINCLAIR: In which we endeavored to give as
complete answers as we could, and those answers went in
on the 26th of October. We asked for an opportunity to
discuss them after they had had time to consider. But
two days ago we were told that Sir Admiral Waller was
told by Admiral McCormick that the Navy Department had
decided what could be done and that their decision was
being communicated to you, and they did not feel it was a
matter for discussion at this stage.
Unclassified
31
- 3 -
Well, we waited to see whether, in fact, that would
happen. Às far as I know, it hasn't happened.
H.M.JR: It happened late last night. As a result of
this letter from Lord Keynes, which came in at four or five
o'clock, I called up Mr. Forrestal and asked him about it.
He thought it had come over the day before. He asked
Admiral Horne, but it hadn't. It only got in, I think, as
a result of my telephone call. It must have come in at
six or seven o'clock last night. I haven't read it yet,
but I asked Forrestal what was the idea, and he said the
idea was simply this, that he thought they should make up
their minds what they should do, and then refer it to the
American Committee for advice. He asked if that was the
correct way they should proceed before they submitted it to
you people.
I said, "Well, that hasn't been the way that the
Army proceeded."
lie said that he felt this was the way they should
proceed. This is in no sense an ultimatum, but they
wanted to refer it to the American Committee for advice
and then if the top committee thought it was all right,
then they would show it to you people.
I said, "It isn't up to me to advise the Navy how to
proceed."
I would like to see the letter and study it, but I
haven't had a chance to read it.
LORD KEYNES: We have no means of knowing whether
it is satisfactory or not. If it is unsatisfactory it
would be unsatisfactory on small details that none of us
can judge on. Whether the technicians on the two sides
ought to be exchanging their views--
(Mrs. McHugh enters the conference. Hands Secretary
letter of November 2, 1944, from Secretary Forrestal)
Regraded Unclassified
32
- 4 -
MR. SINCLAIR: The trouble is one of very small
dimensions, relatively, Mr. Secretary, because if you
exclude the repairs, which are almost impossible to
estimate - it has been running at a level of around eleven
million dollars, and then take out quite a considerable
proportion for work on new ships which is at present pro-
ceeding and will not be affected by these discussions,
you are left with something on the order of a quarter
of a million dollars representing the "hardware" which
the Admiralty is asking for. And off that there is one
considerable item. What we are asking for is a very
large proportion of American produ tion in that one item.
For all the rest of the items, what we are asking for is
a tiny proportion of American production.
So there is not in this problem anything like the
difficulties, one would say, which require long and com-
plicated discussion as was the case with the Air program
or the ground Army program - which discussions were, in
fact, undertaken exceedingly thoroughly and quickly.
H.M.JR: Well, as long as Mr. Forrestal has taken
this direction, I would like to have an opportunity to
study it with my associates on the Committee. But I
promise you that before the sun sets tonight we will be
in touch with you as to the Navy program. Now, I can't
move any faster. This doesn't show the time of arrival,
but it was handed to me last night at nine o'clock. It
is only dated November 2. He was sure he had signed it
on the first. Well, it is dated the 2nd, so he is wrong.
So I can't move any faster than that.
MR. SINCLAIR: We very much appreciate it, Mr. Secretary.
That was one of the ideas in our minds when we were asking
for an early meeting to consider the aircraft agreement,
because we felt it was desirable to maintain, as you had
so repeatedly emphasized, this sense of urgency over the
whole business.
H.M.JR: I am in complete sympathy with the thing,
but I do think, in view of the fact that that is
Regraded Unclassified
33
- 5 -
Mr. Forrestal's wishes - he says here, "Before our Sub-
committee replies to the British, I would appreciate your
informing me whether this procedure is satisfactory to you."
So I have got to read it, I have got to give it to the
American Committee and give them a chance to answer. But
we can move fast enough SO that before official sunset
tonight - I don't know what time it is, it is around six-
thirty - we will be in consultation with you if you are
free sometime this evening.
Is there some other matter?
LORD KEYNES: If we have the meeting this evening
we shall have in front of us the agreement with the Air
people, and that has a clause in it about our underwriting,
in Part "A".
We shall have to put in the reserve just before, and
I was wondering whether there was an impossibility of
clearing. We could suggest an alternative phrase. If
we had a phrase about the Dominions similar to the one about
the United Kingdom, I think it would be all right. But I
don't know what is in the minds of the Air people in putting
in this clause which is unconstitutional in asking something
which is not possible, and recommending that as a condition.
We think it is something which ought to be discussed
if there is anything to discuss in connection with the
Dominions' application for Lend-Lease. It seems out of
place in this agreement.
I just wanted to mention something which we shall be
raising.
MR. COE: It is that old problem, Mr. Secretary, of
reciprocal aid from the Dominions, and I think back of it
really lies the Army and Navy desire to get in one place
some words which deal for all territories. Now, they
keep on trying that. The Army ground people did the same
thing, as you say. The Air Rorce people, I think, as
Sir Robert says, are just copying the Army ground force
one in making sure that they are not retreating one whit
more than the Army did.
Regraded Unclassified
34
- 6 -
H.M.JR: Frank, before 1 meet with the people again
I wish you could have a subcommittee meeting of this thing
and sort of air it. Can you do that?
MR. COE: Well, that depends on the time. Now, will
you want me to meet with the American group on the Navy
matter before you meet with the British group?
H.M.JR: I tell you what I will do. I don't know
until General "atson sees the President - sometimes he
doesn't see him until eleven - then he gets his appoint-
ments. But the minute I know, I will be in touch with
Coe and we will try to set up a series of meetings this
afternoon. How will that be?
LORD KEYNES: On this Dominion matter I thought it
might perhaps help if I let you see beforehand the sort of
thing I should be saying.
H.M.JR: Could you get that to Coe?
LORD KEYNES: Yes, by lunch time.
H.M.JR: Fine. well, as I say, I will not leave town
without straightening this thing out.
Regraded Unclassified
November 3, 1944
11:24 a.m.
35
HMJr:
I have just heard this second that there will be
no cabinet.
Frank
Coe:
There will be no cabinet meeting.
HMJr:
Now, so I'm free all afternoon. Now, how can we
work this thing?
C:
Well, what would you say to the American group,
including the Navy, meeting you at two-thirty
and then the British group
....
HMJr:
Now, wait a minute. I'd a little bit rather
have -- let's say the American group at three.
That doesn't rush me quite 80 much.
C:
All right. American group at three.
HMJr:
American group at three.
C:
And the British at three-thirty.
HMJr:
That's all right.
C:
Is that all right?
HMJr:
That will be perfect.
C:
Okay. Then we'll set it up that way and try to
get the Navy.
HMJr:
American group at three and the British group at
three-thirty.
C:
Yes, sir. Mr. Secretary
HMJr:
Please.
C:
....
after looking over that Forrestal letter to
you, I literally could not see the connection
between it and what Sir Robert Sinclair said so
I'm going to check back.
HMJr:
All right.
C:
Is that all right?
HMJr:
You mean it doesn't -- I don't -- no, I'm not
quite sure
Regraded Unclassified
36
- 2 -
C:
Well, Forrestal's letter stated some -- states
some conditions
....
HMJr:
Yeah.
C:
....
that the Navy is putting on giving these
goods and, by the way, they're being rather tough
it seems to me.
HMJr:
Yeah.
C:
What Sinclair seemed to be talking about was
some absolute refusal to give a big block of
goods but I couldn't even find it in what
Forrestal wrote you. But I guess we can clear
that up.
HMJr:
Pardon?
C:
Thank you.
HMJr:
All right.
Regraded Unclassified
November 3, 1944 37
2:33 p.m.
John J.
McCloy:
How long are you going to have that movie?
HMJr:
I haven't got it here -- I don't know.
M:
What I was thinking about if -- tomorrow if you
could shoot it over here, I'd have our special
service people who do that work here take a look
at it
HMJr:
Wonderful.
M:
with an idea of possible use.
HMJr:
Well, now will you hang on while I talk to
FitzGerald who handles that? Will you wait
just a second?
M:
Right.
HMJr:
(Speaking on the inter-office communication
system: Fitz, can you get that Russian picture
"Rainbow" over to Mr. McCloy tomorrow? Answer:
It's gone back to New York. HMJr: Well, you
call them up, will you? Answer: Yes, sir.
HMJr: And tell them Mr. McCloy would like to
have it to show to some Special Services people.
Answer: Right. May I have it brought right
back again? Possibly there will be some Treasury
people coming down. HMJr: You mean today? Answer:
Yeah. You see, it's on the train now. HMJr: Yes.
FitzGerald: On the way up. HMJr: Listen, you see
if it's agreeable to the Russians if you can deliver
it tomorrow morning to Mr. McCloy. FitzGerald:
Right. HMJr: Now, how you do it is your business.
FitzGerald: Okay. HMJr: Right.) Hello?
M:
Yes.
HMJr:
I don't know whether you could hear.
M:
I got part of it.
HMJr:
Well
M:
It was on its way to New York.
HMJr:
Yes, and he's going to get it -- if necessary, to
have a Treasury man bring it back.
Regraded Unclassified
- 2 -
38
M:
Oh, fine.
HMJr:
And they'll deliver it to you tomorrow.
M:
Fine. Fine. It will be over here sometime
tomorrow morning, then?
HMJr:
I'll have it
....
M:
If you can.
HMJr:
I'll have it there to your office by nine
o'clock.
M:
Okay. Fine.
HMJr:
Without fail.
M:
Good. Much obliged.
HMJr:
And ....
M:
You know what they think about it.
HMJr:
Uh -- what's that?
M:
They've got experts up there that go over it
with the idea of the effects on troops and
what not. I'd like to have them see it.
HMJr:
Yeah, I'd like to know what their reaction is.
M:
I'll tell you.
HMJr:
Thank you so much.
M:
Okay. Say, I had a very pleasant time last night.
HMJr:
We enjoyed having your wife and you.
M:
It was a lot of fun.
HMJr:
....
very much.
M:
Thank you.
Regraded Unclassified
39
November 3, 1944
2:36 p.m.
HMJr:
Morgenthau talking.
Ambassador
Gromyko:
Good afternoon, Mr. Secretary.
HMJr:
How are you?
G:
Thank you. I am very glad to hear your voice.
HMJr:
Mr. Gromyko
G:
Uh huh.
HMJr:
I thought you'd like to know I saw the
Russian picture last night, "Rainbow".
G:
"Rainbow"?
HMJr:
Have you seen it?
G:
Yes, I did.
HMJr:
Well, it's magnific ent.
G:
I am very pleased to hear this.
HMJr:
And as a result of my seeing it, Mr. McCloy is
going to show it to the Special Service Division
of the Army.
G:
I see.
HMJr:
With the possibility of their showing it to our
troops.
G:
Uh huh.
HMJr:
And then I called up Mr. Spyros Skouras, who is
President of 20th-Century Fox and told him to
see it, and urging him to distribute it through
their seven hundred theatres.
G:
Uh huh. What did he say?
HMJr:
Well, he said he would see it this week-end.
G:
(Laughs) I am very pleased to hear this. When
did you see the picture?
Regraded Unclassified
60
a 1 I
HMJr:
Pardon?
G:
When did you see the picture?
HMJr:
Last night -- I saw it last night. I sent for it --
to the Treasury -- I had it at the Treasury.
G:
At the Treasury?
HMJr:
Yes.
G:
I see.
HMJr:
I saw it in the Treasury last night.
G:
Uh huh.
HMJr:
And now I'm trying to get the film and sending it
over to Mr. McCloy, who I had here last night, also,
and he saw it.
G:
Uh huh.
HMJr:
And he's going to show it to the Army tomorrow.
G:
I liked it myself. I think it is very -- very
good.
HMJr:
Well, ....
G:
It is very realistic. There is nothing -- there
is nothing artificial.
HMJr:
No.
G:
No fiction -- it is simple and terrible, bitter
reality.
HMJr:
It's -- it's magnificient. And those actors --
you feel as though you're living right in the
village with them.
G:
Uh huh.
HMJr:
I didn't feel that they were actors. Are those
all actors or were they some real Ukraines? Are
those all professional actors?
G:
I think that they made those probably with
professional actors.
Regraded Unclassified
M I I
41
HMJr:
They are?
G:
Yes, in "Rainbow" they are professional actors.
HMJr:
Well, you might -- I don't know what -- which
one of your organizations handle these films, but
you might tell them that they may be hearing from
Mr. Skouras, the President of 20th-Century Fox.
G:
May I ask you to spell his name?
HMJr:
Yes, S-k- ....
G:
Uh huh.
HMJr:
o-u ....
G:
o-u.
HMJr:
r-a-s.
G:
r-a-s.
HMJr:
S-k-o-u-r-a-s.
G:
20th-Century ....
HMJr:
He's the president of the 20th-Century Fox.
G:
I will -- I will write to the proper cinema
people
HMJr:
That's right.
G:
....
about it.
HMJr:
They have -- if they take it, they have seven
hundred theatres.
G:
Uh huh. It would be very good.
HMJr:
Yes.
G:
It would be very good if they
....
HMJr:
If you get anything else as good as that, let
me know, will you?
G:
If I know -- what did you say?
Regraded Unclassified
12
- 4 -
HMJr:
If you have any other picture coming like that,
I'd like to see it.
G:
Oh, I see, any other picture.
HMJr:
As good as that.
G:
All right, or better?
HMJr:
Better.
G:
(Laughs) And if it is better you would not mind.
HMJr:
If it's better I would not mind, but if it's as
good, it will be very good.
G:
All right. I will do -- will not hesitate.
HMJr:
Right.
G:
All right.
HMJr:
And
G:
And how are you generally?
HMJr:
I'm all right. They kick me around in the
newspapers but just as long as I know I'm right
....
G:
(Laughs)
HMJr:
on how to treat Germany, I don't mind.
G:
I would like sometime to -- to have lunch or to
dine with you and Mrs. Morgenthau at the Embassy.
HMJr:
Well, we'd like to very much and we're going home
tonight to vote.
G:
I see. It is a difficult task for you, too,
because it is quite a long distance.
HMJr:
That's right but I -- I'll get in touch with you.
I'll speak to Mrs. Morgenthau and then I'll get in
touch with you.
G:
Thank you very much. And I hope I will see you on
November the 8th. You will be able to come to
Washington?
Regraded Unclassified
in . 1
43
HMJr:
No, I'll be in the country.
G:
oh, I see.
HMJr:
I -- We sent our regrets.
G:
I see.
HMJr:
We're going up now and we're going to stay
there until the President comes back.
G:
Then I hope you
....
HMJr:
You see we live near -- we live near him.
G:
I see. I hope I will see you and Mrs. Morgenthau
after the
....
HMJr:
You will.
G:
....
the election.
HMJr:
You will.
G:
All right.
HMJr:
And how is your good wife?
G:
Thank you. She 18 all right. She is much, much
better than before. How 1s Mrs. Morgenthau?
HMJr:
She's all right, thank you.
G:
She is all right?
HMJr:
Yes.
G:
As to myself, I was -- I spent two and a half
months in Moscow
....
HMJr:
Oh.
G:
in -- from June the 10th to August the 20th.
I departed from Washington on June the 10th.
HMJr:
Yes.
G:
And arrived just before the so-called ... (inaudible)
HMJr:
Oh-oh.
Regraded Unclassified
- 6 -
44
G:
(Laughs)
HMJr:
You don't say it as though you liked it.
G:
Oh, I like it.
HMJr:
You like it?
G:
Yes, because ... (Remainder of sentence inaudible).
HMJr:
I see.
G:
For the Russian people, it sounds like
Italian ... (Remainder of sentence inaudible)
HMJr:
The way you said it, it sounded like a
swear-word.
G:
(Laughs) That's right.
HMJr:
All right. Thank you.
G:
Thank you for calling.
HMJr:
Bye.
G:
Bye.
Regraded Unclassified
45
November 3, 1944
2:44 p.m.
Operator:
Go ahead.
Grace
Tully:
Hello.
HMJr:
Hello.
T:
Mr. Secretary, how are you?
HMJr:
I'm alive.
T:
That's good. Mr. Secretary, on that memo
you were asking about, the President said,
"No, that was just for the State Department.
It's a 'Top Secret' to the State Department."
HMJr:
Well, sometime when I see you, I'll tell
you about it.
T:
All right. Fine. If it's a 'Top Secret', they
shouldn't have been handing it around, I take
it, or people shouldn't have known it was there.
But he's not willing to have any copy sent to
any Department.
HMJr:
Well, when I see you, I'll tell you about it.
T:
All right. Fine.
HMJr:
Thank you.
T:
All right, Mr. Secretary. Bye.
HMJr:
Bye.
Regraded Unclassified
46
USC/303
CCLL
Copy No. 3
TOP SECRET
U.S. Committee on Mutual Lend-Lease Aid
Between the United States and the United Kingdom
Minutes of Meeting in Secretary l'orgenthau's
Office on November 3, 1944 at 2:30 p.m.
Present
Secretary Morgenthau, Chairman
Mr. White
Vr. Casaday
Mrs. Klotz
Lr. Acheson
Mr. Taft
Mr. Currie
Mr. Cox
Fr. Coe
Mr. Davidson
Tr. Angell
Er. Patterson
Fr. Lovett
General Sonervell
Colonel Stewart
Dr. Gates
Admiral McCormick
Air Requirements and Reciprocal Aid
MR. MORTENTHAU read a note from I'R. COE which reported that
the subcommittee on Army and Fleet air requirements had come to
agreement except as to the reservation which the United States group
had placed in the report--namely, that American agreement on the
requirements was conditioned upon the United Kingdom's underwriting
reciprocal aid from the Empire as a whole.
MR. PATTERSON explained that the paragraph regarding military
reciprocal aid was taken from the Army-Ground Report.
MR. LOVETT said there were two reciprocal aid questions which
were quite different. One deals with components, etc. to be supplied
by the R.A.F. There is no question about this. The other is the
general question of aid from the Dominions and Colonies. This was
placed in the air document to bring it into agreement with the ground
document.
GENERAL SOUERVELL pointed out that whereas commitment on the
part of the United Kingdom to furnish reciprocal aid is categorical
and complete, that by the Colonies and Dominions is hazy and gives
no assurance that we will get what we need. This was the reason for
inserting this reservation. An illustrative case of beef from
Australia was given. The Australians were willing to give the beef
to our Army provided the British would underwrite the cost of it.
Though this was finally worked out, there was a great deal of delay.
The proposed assurance from Britain would be of particular value in
the Pacific war. There is growing resistance in India to furnishing
supplies the U.S. Army asks for. GENERAL BOMERVELL stated that he
wanted an administrative arrangement whereby the British spoke for
the Colonies and Dominions when they give materials to the United
States, in the same way that they did when they asked for articles
from the United States.
In response to a question from MR. WHITE, GENERAL O'ERVELL
said that the Army's misgivings regarding military reciprocal aid
concerned not so much the actual delivery of the goods, as the question of
financing, MR. PATTERSON pointed out that it did not matter to the
47
- 2 -
Army which part of the British Empire paid for the goods, so long as
the Var Department did not have to pay for them.
There was distributed a document from Lord Keynes (U.S. No. 22)
which gave reasons why the British could not make the commitment that
was being asked of them. In response to a question from LR.
HORGENTHAU, KR. ACHESON said that he thought the question was funda-
mentally a financial matter and not a constitutional matter as was
stated in the British document.
At MR, MORGENTHAU'S suggestion, I'R. PATTERSON summed up by
saying that either the British or the Dominions should agree to under-
write the reciprocal aid program, in which event the reservations
could be dropped, or else the U.S. side should uphold the reservations,
MR. ACHESON was not sure that be agreed. Because he thought
the question was inherently financial, it could not be answered until
decisions had been made upon the British sterling and general inter-
national finencial position.
MR. COR pointed out that the British would particularly ask
whother the Army or Navy were dissatisfied with existing arrange-
nents. If the reply was that goods wore being dolivered satisfactorily
under those arrangements, the British would nak why they should be
changed. KR. PATTERSON said that the problem of getting the goods
was not acuto ct the moment, but that existing arrangements would
not be so satisfactory when the theatre of fighting was distant from
the source of supply.
MR. MORRETHAU stated that he was not setisfied with the amount
of agreement which had been reached by the United States group, and
that accordingly he wanted the general American Subcommittee to meet
on this and confer with the British further. 1R. MORGENTHAU received
from GENER'L SOURRVELL assurance that E short delay to obtain agree-
ment on the American side would not hold up any supply deliveries or
delay the war,
2. Navy Program
MR. PORGESTHAU explained to PR. TATES that the British were
somewhat disturbed about the procedure which was to be followed in
discussing their /dmiralty requirements. He said that as he under-
stood it, they hoped we would follow the same procedure as on the
Army-Ground requirements, where there were detailed discussions by
the representatives of the two countries and then an agreement on
the handling of the items, which was sent to the top committee as
en agreed report. The British had heard about the report which the
Navy had drafted, but they had not had a chance to 800 it, and
were afraid that they would not be allowed to see it.
ADMIRAL McCORMICK replied that the Navy procedure was what the
British had suggested, viz., that the Navy should take due note of
Admiralty roquirements when initisting or rovising production schedules.
The Navy had thought that it was agreed on all sides that nothing like
e protocol was involved. Accordingly they wished to tell the British
that they were willing to take "due note," at the same time pointing
out cortain places where the Unitod States would not be able to carry
out British requests, and avoiding mention of over-all doller figures
or dollor figures for perticular items. This was the purport of
SECRETARY FORRESTAL'S letter (U.S. No. 26) to SECRETARY MORTHNTHAU.
MR. MORGENTH'U explained that he was not criticizing the Nevy's pro-
cedure, but that the British did not understand it.
'fter further discussion, the sense of the meeting was that
so far as possible all the different programs should be handled
according to a similar procedure, with the British given opportunity
to discuss the particular items, the over-all amount to be granted,
and the procedures to be followed, The agreement would be embodied
in a report to the Committee. I'R. WTES stated for SECRETARY
FORRESTAL that this procedure was acceptable and that PR. MORGENTHAU
might so inform the British at the following meeting.
48
November 3, 1944
3:00 p.m.
AMERICAN DELEGATION FOR BRITISH LEND-LEASE
Present: Mr. Patterson
Mr. Currie
Mr. Acheson
General Somervell
Admiral McCormick
Mr. White
Mr. Cox
Colonel Stewart
Mr. Lovett
Mr. Taft
Mr. Gates
Mr. Coe
Mr. Davidson
Mr. Angell
Mr. Casaday
Mrs. Klotz
H.M.JR: I thought our luck might hold until Tuesday
on the secrecy of these meetings, but it didn't hold out.
That is too bad.
(Mr. Taft enters the conference.)
H.M.JR: It is too bad that some people couldn't
keep their mouths shut.
Incidentally, we here in the Treasury are not saying
anything a bout this story which broke on the front page
of the New York Times this morning by Arthur Krock. The
British Embassy kept referring the reporters to us today.
Finally, it seems, Mr. Brand told them they could look to
the Treasury or the White House for a statement. We are
not going to make any statement, particularly in view of
what the President said. The question was asked, "Mr.
President, any comments on the published report that Britain
Regraded Unclassified
49
- 2 -
seeks certain Lend-Lease supplies of B. non-military
nature for resale?"
The President's answer was, "Never heard of it."
MR. ACHESON: We understood that everybody was being
referred to FEA. (Laughter)
H.M.JR: That is ail right with me.
MR. CURRIE: That doesn't tell us what we are to say.
MR. ACHESON: I thought-Oscar had a draft of what he
was going to say.
H.M.JR: You (Acheson) and I talked yesterday. As a
result of that, you said you would call up Oscar.
MR. ACHESON: I did.
H.M. JR: I just wanted to let you know that at this
end our press section is saying nothing. But I feel very
badly that the thing has broken. It is too bad one can't
work on semi-military matters without somebody having to
shoot his mouth off.
Well, Mr. Coe has given me an a genda here which I am
reading for the first time, "1. Air Requirements - The
report of the Subcommittee, consisting of U.S. Army Air
Force and Navy officials, and British Air officers, will
not have been seen by the other members of the American
Committee. It might therefore be in point to inquire of
the American officials who have worked on this side of
the program whether there are any problems which they wish
to bring before the Committee. As you know, the British
wish to bring up the reservation concerning reciprocal aid.
If that problem is disposed of satisfactorily, the top com-
mittee can presumably accept the report." (Agenda attached)
Now, Mr. Patterson, who would talk?
MR. PATTERSON: General Somervell.
Regraded Unclassified
50
- 3 -
MR. LOVETT: Is this on the air, sir?
H.M.JR: Yes.
MR. PATTERSON: The air paragraph there on the U.K.
The report of our reverse Lend-Lease requirements from
the Dominions was taken, as far as the Air Forces were
concerned, from the Army Ground report. And that is an
item that General Somervell knows the facts about in detail.
MR. LOVETT: There are two aspects of this, Mr.
Secretary. The general agreement on the Navy aircraft
types has been completed, and we are in accord on it.
There were two paragraphs covered in the agreement, one of
which relates to a recommendation of the U. S. representa-
tives that the U.K. accept the responsibility for furnishing
reciprocal aid throughout the British Empire and Commonwealth,
as required by the common interest. As the Under Secretary
said, that is in consonance with the ground troops paragraph.
But there is another paragraph which was agreed to by the
RAF delegation that relates to what is called air items.
And as I understand it, there is no question about that
since it relates only to the U.K. It reads, "In the interest
of the most efficient utilization of shipping at the disposal
of the two countries, and depending upon the production of
stock possible at the time the U.K. undertakes to C ontinue
to supply air items of reciprocal aid within the limits
prevailing at the time of the defeat of Germany--".My
understanding is that that is not in question, but that the
question revolves about the general U.K. guarantee of
reciprocal aid. That is included in the air document
only to bring it into agreement with the ground.
GENERAL SOMERVELL: The document that the British
submitted had two references to reciprocal aid, one having
to do with what we were to get from the U.K., which was
categorical and complete, asserting they would continue to
furnish reciprocal aid at the same scale they were furnish-
ing it now. Consequently, there is no point to discuss
in reference to that.
The other reference was to aid that that might be
supplied by the Dominions or Colonies. In that reference
Regraded Unclassified
51.
- 4 -
the allusion was very hazy and really gave us no assurance
that we would get reciprocal aid that we might need. Conse-
quently, our committee put in as a condition to granting
the British what they asked for, that we receive assurance
from the British that we would obtain reciprocal aid from
the Colonies and Dominions in order to make the most efficient
use of shipping. A case in point is the case of beef,
which we wanted to obtain from Australia. The Australians
had the beef. They were perfectly willing to provide the
beef, but they did want assurance from the British Govern-
ment that they would underwrite the cost of it, inasmuch as
the beef was to be delivered to India. The discussion which
ensued took a terrific amount of time, but has finally been
worked out all right. But we feel that we should receive
an assurance from the British Government that they will
underwrite or assure us of these reciprocal aid supplies
from their Colonies and Dominions. It will be particularly
important in the war in the Pacific in reference to New
Zealand and Australia. It is always important in connection
with India. We have built up a growing resistance in India
to furnishing us with the supplies which we ask for.
The British tell us that they are being denied supplies
by the Indian Government now on the basis that they are
furnishing the supplies to us, and, hence they can't be
supplied to the U.K. But something has to be set up, it
seemed to our committee, so that the British Government
will be the British Government all the way through, in
other words, so they won't speak for the Colonies when they
get stuff from us, and won't deny the ability to control
the Colonies when speaking in reverse. That is the whole
point at issue.
If we are going to deal with the British Empire, it
struck us that we ought to be consistent in our dealings
and they ought to be willing to guarantee to us the same
kind of treatment from both directions.
H.M.JR: Now, do I understand, General Somervell, that
you have reached an impasse with them?
GENERAL SOMERVELL: No, they merely said that that
point was of such great importance that it could not be
Regraded Unclassified
52
- 5 -
dealt with on the lowly levels at which we were operating.
So we had to put that up to you, sir.
MR. COE: Mr. Secretary, we have here, if I may distri-
bute it, the British contention that Lord Keynes just got
over, the idea they see in meeting the Army's requests.
(Mr. Coe distributes copies of attached memorandum A)
MR. WHITE: Is the Army's request based on the necessity
for getting specific items, or is it that, plus the fact
that you don't feel you want to pay for them? Could you
separate the two for a moment for discussion? Supposing
you could be assured of receiving such things as you want
from the sources which you want them to take care of the
shipping situation, leaving aside for a moment the question
as to what financial arrangements are made between the U.K.
and Dominions, or between us and the Dominions. Would that
satisfy the Army, or are you also including India in your
discussions and negotiations and the question as to how
it shall be financed?
GENERAL SOMERVELL: I think our misgivings about
actually being able to find the supplies are not as strong
as they are about the financing. Our point of view was
that we have supplied the British Commonwealth with
something like twenty-two billion dollars' worth of materials,
and that they in turn have given us about four or five
billion dollars worth of materials. And to be perfectly
frank, it never occurred to us that we would be expected
to pay for anything with the balance so strongly against
them.
MR. PATTERSON: I think if we get, for example, beef
for our forces in India on reverse Lend-Lease, coming from
Australia, it does not matter to us whether the British
pcik it up so far as financing it is concerned from
Australia, or not. If we get it on reverse Lend-Lease,
either from Australia or from Britain--
MR. WHITE: Then the problem of the Army is not that
you get it, but that you get it on reverse Lend-Lease.
Regraded Unclassified
53
- 6 -
MR. PATTERSON: That is right. We ought not to
have to pay for it.
GENERAL SOMERVELL: And I do think there ought to be
the obligation there for them to supply it on B basis of
priority other than our going out in the open market and
buying it.
MR. PATTERSON: I understood, though, that the question
was projected by an unwillingness for a time at least on
the part of the Australians to furnish it on reverse Lend-
Lease unless the U.K. would pick it up.
GENERAL SOMERVELL: Unless the U.K. underwrote the
deal, they were unwilling to furnish it.
MR. LOVETT: There is a somewhat different situation,
Mr. Secretary, with respect to the items designed to be
covered by Section 10 of the Air Agreement applicable to
the Army and Navy air types.
MR. TAFT: It is eleven, isn't it, Bob? Ten is the
ground forces, according to their memorandum.
MR. LOVETT: There are two items.
MR. TAFT: Yes, you are talking about the first one.
MR. LOVETT: The first is item ten, and the second is
item eleven. Unlike the situation which Mr. White and
General Somervell were discussing, our entire scheduling
of certain types of products is dependent on the emergency
supplies we draw from the U.K., principally in Britain, and
to some extent India and Australia, of what we call short-
order items. For example, if we have a continued period
of high operations with fighter bombers, because of the
shipping allocations, we may run temporarily low in our
reserve of droppable wing tanks or some other item, out
using the droppable wing tanks as an example, because that
is a consumable item, we procure those locally. They are
simple to make, and they have been providing us with those.
Now, if they cease to provide us with those on some reasonable
schedule, we must then reopen in this country certain
Regraded Unclassified
54
- 7 -
facilities which we have diverted to other parts of the
program to meet other British or U. S. requirements.
And there was no disposition on the part of the Royal Air
Forces to question our item ten in any respect.
(Mr. Cox and Mr. Davidson enter the conference.)
MR. PATTERSON: It is just an ordinary routine case
of reverse Lend-Lease.
MR. TAFT: More than that, because it is essential.
You can't do without it.
MR. LOVETT: You can't do without it unless you re-
adjust all the schedules, and they recognize it might require
us to reduce the allocations made to them on other items.
So to try to make the situation clear, there is that
distinction between the problems which we face.
H.M.JR: I would like to ask Mr. Acheson a question.
This question is being raised here now in connection
between the British and U.K.--is that up in any other
matter? Is this something new or something that has
been going along on a number of other questions?
MR. ACHESON: The first matter, the one that General
Somervell and Mr. White were talking about is a matter
which has been talked about before. I think Mr. Lovett
is quite right, that the item that he mentions is wholly
different and that doesn't raise any of these problems.
MR. LOVETT: And they have accepted that.
MR. TAFT: There was no argument.
MR. ACHESON: I think the other question raises in
the British mind--I haven't read this memorandum, but I
suppose it raises financial questions.
MR. PATTERSON: Constitutional questions, they say.
Regraded Unclassified
55
- 8 -
MR. TAFT: The question of whether they can speak for
the Dominions.
MR. ACHESON: Well, it is fundamentally a financial
question. In our reverse Lend-Lease with the Australians,
the Australians have not undertaken to supply items for
American forces in other theaters. We discussed that at
the time, and the arrangement was made that they should
not be called on to do that.
Now, in effect, what is now said is that if the
Australians feel that under their agreement they are not
bound to do this and they couldn't do it, anyway, then
the British should step in and pay the Australians. That
is the point. The British say that constitutional question
is just 8 little taut. Nobody is raising a constitutional
question; it is really financial.
GENERAL SOMERVELL: I believe this constitutional
business is just eyewash.
H.M.JR: Do you gentlemen feel that we want to
answer that question this afternoon, or should we let it
go over?
MR. WHITE: Mr. Secretary, if they can be assured the
supplies, if the Army can be assured what they are
asking for with the proper priority, then that might be
enough for the moment, leaving the question of the financial
arrangements to be dealt with after all the things are in
and you have a chance to look at the over-all picture. I
don't know how much it amounts to.
MR. PATTERSON: We have a good case on principle in
the case of the beef for the troops in India. It may be
beyond the past commitments of the Australians, because
it is not right in Australia or next door to Australia,
but it is a military operation against the common enemy, and
it does save a vast amount of shipping that we would have
to divert to carriage of that supply away from this country
over to India.
Regraded Unclassified
56
- 9 -
H.M.JR: Now, do I understand this correctly, that
you would like to tell them this afternoon that if they
will guarantee the amount of beef that you want from
Australia you are willing to go ahead with the air require-
ments?
MR. PATTERSON: Oh, yes.
GENERAL SOMERVELL: No.
MR. PATTERSON: Yes, we are ready with these--
GENERAL SOMERVELL: As far as the air requirements
are concerned, yes, but I wouldn't want to tie it up with
furnishing beef.
MR. PATTERSON: No, no, the question is whether that
clause, clause ten of the general Army program, and clause
eleven, which is identical to the air program, should, be
accepted by the British. It is none of our concern who
finances that provision for the beef to the troops in
India, for example. If Australia will enlarge her present
engagement and pick it up alone, that is O.K. If they
won't, then we feel the British should do it. Of course,
they have been in a difficult position all along, that is
to say, a somewhat inconsistent position, that when they
want military supplies, the U.K. speaks for the whole
Empire. Their program is framed on that basis. But on
the reverse side they say, "Oh, well, we can't bind the
Dominions." That has been a weakness in their position
all along. At least, so it seems to me.
GENERAL SOMERVELL: Australia is not the only place.
For example, we have no reverse Lend-Lease agreement with
Sudan, SO we get charged for carrying our troops on the
railroad, and atthe same time we are furnishing locomotives
to all the troops. So it extends over the whole British
Commonwealth.
H.M.JR: Well, Bob, for my benefit, would you advise
me what you think we ought to tell the British on this
when we see them? Would you like to sum it up for me?
Regraded Unclassified
57
- 10 -
MR. PATTERSON: The Dominions now having come in, it
would seem to me that either the Dominions should pick up
these other items as part of their reverse Lend-Lease
program, in which event we can drop these clauses, or the
clauses should stand.
H.M.JR: That is simple.
MR. PATTERSON: Don't you think so?
MR. COX: Yes. And that, Mr. Secretary, is influenced
by one other fact. The Dominigns not only have come in,
but they have begun to ask for a more liberal approach,
which I think is sound. But the two are tied together,
both on the merits and politically. If you are getting
more liberal on the amount of Lend-Lease aid supplied and
get restricted from the Dominions' standpoint on the reverse
Lend-Lease, then the only way you can explain it is on the
basis of the financial position, which is at best a difficult
thing to do.
H.M.JR: I wonder if that is agreeable to Dean Acheson,
what Mr. Patterson said?
MR. ACHESON: I don't really know just where it leaves
us, Mr. Secretary. The whole thing seems to me to be 8
financial question. I think the British point of view
will be that if they undertake to underwrite what the
Dominions furnish in addition to what the Dominions are
required to furnish under their own Lend-Lease, that will
increase their sterling obligations, and that is one of
the problems with which they are faced. And they won't
want to do it.
Now, it is primarily a financial matter. I don't
think it is primarily 8 military matter.
MR. LOVETT: I don't believe we can let the case
stand before you, Mr. Secretary, on the basis of the
provision of beef or an item of that character for the
Far Eastern air forces operating up through the islands
in New Guinea, northwestward. A proportion, small to be
sure, of their supplies together with items of consumption
Regraded Unclassified
58
- 11 -
character are procured locally through the Australian
establishments. Now, if they do not continue that for any
reason, it means we must go back into the rescheduling of
facilities and cut back on some other items in order to
compensate for it.
MR. TAFT: There is no question of taking that away,
is there?
MR. LOVETT: I don't think so. I see the problem
as Mr. Acheson sees it, that if we agree in principle that
this is to be supplied, then it becomes a problem for the
British Commonwealth of nations to settle among themselves
as to their financial arrangements. But I think we do need
assurances that the continuation of supply can be anticipated.
MR. TAFT: That jumps the question, however, the
question as to whether it is reciprocal aid or whether it
is paid for. The difference there is financial. The
thing that is important from the military standpoint is
that the beef goes from Australia to India.
MR. LOVETT: I can't see why we should be required to
pay for something we are not now paying for.
MR. TAFT: That is right. But that isn't a military
problem.
GENERAL SOMERVELL: It becomes a military problem if
in making these settlements delay is of some consequence,
then, and only then.
MR. TAFT: That is right. We have to settle it one
way or the other.
MR. LOVETT: Or we have to ask for appropriations.
I think it has a serious implication.
H.M. JR: Mr. Coe, I don't think there has been enough
discussion of this on the subcommittee level. Unless there
is disagreement, I would like to refer this back to the
American subcommittee to discuss it further and confer
with the British further. There are too many different
Regraded Unclassified
59
- 12 -
opinions for us to go into a discussion with them this
afternoon. I don't want to go into any discussion with
them unless we have a united front here, which I don't
feel we have at the moment. I mean, Mr. Acheson isn't
sure, and I am not sure. There is too much doubt here.
MR. PATTERSON: Well, Henry, it is a very simple case,
though. The British come in with a book. The military
requirements in that book, they explain, are for the benefit
of Australia, New Zealand, and themselves. And they ask
us to promise them that we will furnish these military
supplies to the New Zealand forces and the Australian
forces.
Then we say, "We will, yes, but we think that a
requirement of our own forces, where the source is
Australia, ought to come in on reverse Lend-Lease."
But they say, "Oh, no, we don't think so."
Their presentation is on one basis, but they don't want
ours to be P esented on that same basis. They want it to
be presented on another basis, which is that they have
nothing to do with Australia, although they have requested
large amounts of military supplies for Australia. Now,
that is all there is, as I understand it.
MR. ACHESON: That isn't all there is; there is
another element of question which ought to be coincided;
at least you ought to have the opinion of the financial
authorities, and that is whether it is or is not desirable
to push this reverse Lend-Lease in situations where it
increases the U.K. sterling obligations to the Dominions.
Now, maybe it is, I don't know. But that is the thing--
MR. PATTERSON: If they want to do it that way, Dean,
they ought to paretheir own requests down to their own
forces and say to the Australians, "You take up with the
United States military authorities your military requirements."
And we would make engagements directly with the Australians
on those items. It seems to me an inconsistency. It is
8. long standing--it has not come up for the first time
by any means. But they have always been in that predicament.
Don't you think so?
Regraded Unclassified
60
- 13 -
MR. ACHESON: Yes, that is true.
MR. WHITE: They have taken the position, however,
that when it comes to military terms the segregation of
Lend-Lease goods is only a very nominal one, that is,
it is under the control of the British Army and that it
can go anywhere; that has been their point.
Now, I don't know how valid it is, but it has been an
inconsistency from the very beginning.
GENERAL SOMERVELL: If that is true, then the reverse
ought to be true.
MR. WHITE: Well, certainly--
GENERAL SOMERVELL: We are not asking for anything
for any purpose, except the military purpose. Do you see?
MR. COE: Mr. Secretary, if we are to have a subcommittee
meeting, I might just say for the military, based upon
having heard some of the things the British have said, that
they are certainly going to ask questions as to whether
the Army Air Force and the Navy are dissatisfied, not with
the arrangement, but with the flow of goods, "Are you
getting the goods?" And they will want to know in terms
of new arrangements whether the existing ones aren't getting
you the goods that you are asking for.
MR. PATTERSON: The problem has not been acute yet
because the American forces being supplied, say, by
Australia and New Zealand in the Pacific have been
fighting right in front of those countries. It comes up
on a case like the one General Somervell put where the
aid to be furnished is to be delivered to a force fighting
the same enemy, all right, but in a theater more remote.
MR. TAFT: I think the distinction is somewhat dif-
ferent. The difficulty is in getting reverse Lend-Lease
from India for any purpose. In the case of Australia,
they have given the Lend-Lease and gone through with their
obligations. India hasn't. So the location of the battle
Regraded Unclassified
€1
- 14 -
really has not been a significant element up o date. It
has been whether it has been India or Australia.
MR. PATTERSON: I agree with you. If the aid is
furnished promptly, it is a financial question.
GENERAL SOMERVELL: And it seems to me that we are
entitled to an assurance on that when we start off.
MR. CURRIE: I gather, Mr. Secretary, that Mr. Patterson's
suggestions indicated an open mindas to whether he would
approach the British or the Dominions, and it might be
desirable to canvass this and see whether the assurances
can be had there. If so, this problem may not arise
with the British. We may not have to ask them to underwrite
it.
GENERAL SOMERVELL: I don't think you can solve it,
because you don't know what you are asking them to produce.
H.M.JR: Well, gentlemen, I am not satisfied, myself.
I have sat in on these things over a number of years, and
a similar thing has come up, and I want the State Department
thoroughly satisfied on this point. I would like to dis-
cuss it further, myself. I can't do it in split seconds.
They are outside. I would just like to pass the thing over.
Now, it isn't going to hold up anything for the Army in the
way of supplies either way, is it, Lend-Lease reverse, or
from us to them? Is it going to hold up anything?
GENERAL SOMERVELL: No, I don't think so. This is
for next year.
H.M.JR: Is it in any way going to retard the war?
MR. ACHESON: I think it is an over-all question
that does not apply particularly to the Army. It applies
to the whole ultimate working out.
H.M.JR: As White says, we have this whole question
of sterling balances up, and I would like to go into this
thing a little more carefully, just as long as the Army
tells me that delaying this thing in no way is going to
retard the war in any way.
Regraded Unclassified
62
- 15 -
GENERAL SOMERVELL: No, sir. It could be delayed a
week without hurting us.
MR. CURRIE: It just means, Mr. Secretary, whether
you want this program given to the British today as being
agreed upon. As I understand the Army's position, they are
reluctant to give it as agreed upon until given some
assurances.
H.M.JR: I would like to hold it up.
MR. WHITE: I think before they come in, Mr. Secretary,
if you have time you ought to go to the Navy level.
H.M.JR: Definitely. I definitely would like to
hold this thing up and have more discussion on it, what
I call the technical level, for lack of a better name.
I would like this thing threshed out more, and would like
to hold it up for a day or SO. You gentlemen have a look
at it. You a re not happy, are you, Dean?
MR. ACHESON: I agree with you.
H.M.JR: Is that all right with you, Bob?
MR. PATTERSON: Yes, sir.
H.M.JR: Then we are agreed that we will hold it up;
as I say, on what I call a technical level, I would like
this thing explored further. I think their feelings are
a little bit hurt, Mr. Gates; that is the impression I
get. If in some way you can give them just twenty-five
words that it wasn't that we didn't trust them or anything,
but you thought the procedure was--I tried my best this
morning to explain to them that this is the way the Navy
wanted to do it, and there was no offense meant, but they
seemed a little bit hurt because they didn't have a chance.
MR. GATES: I don't understand, Mr. Secretary.
They didn't have a chance to discuss it?
H.M.JR: You see, the Army proceeded differently. The
Army discussed the thing with them and came to an a greement,
Regraded Unclassified
63
- 16 -
and then sent it over to this group. You people wouldn't
let them see it, decided what you wanted to do, and sent
it to me at eight or nine 0' clock last night. They have
been hearing, you see, for about the last three or four
days that that was the way you were going to do it. They
kept saying, "Why don't they let us see it?"
I did not answer. But for three or four days they
knew it was coming. Then this document was handed to me
late last night from Mr. Forrestal and they just feel
that they should have had a chance to talk it out first
before it came up to the top committee.
ADMIRAL McCORMICK: I would like to point out, sir,
that the Navy is proceeding more or less in line with what
the British suggested, that the Navy would be a special
case. They said in their paper that if they could be
assured that the Navy Department would take due note of
Admirality requirement when initiating or revising pro-
duction schedules, Naval requirements might be regarded
as outside any arrangement of a protocol character such
as advocated with the other programs. The Navy members
of the committee felt that in carrying that out they would
want to make the agreement, if you want to call it that,
according to the procedure of the Navy Department, telling
the British that they would take due note, perhaps pointing
out some places where they were not going to be able to
carry out their requests, and trying to avoid even mentioning
any dollars and cents. That is why Mr. Forrestal sent the
letter to you, sir.
H.M.JR: I told Mr. Forrestal that I was not criticizing
in any way his procedure. I mean, that is his privilege.
Ana any method that he wanted was entirely agreeable to me.
I told him that, and he has told that to Admiral horne
last night.
But I am just saying that the English don't quite
understand it, the way you suggested. If you would give
them an explanation--
MR. GATES: Couldn't we give them this explanation
that we have just given you, because that is the story?
Regraded Unclassified
64
- 17 -
ADMIRAL McCORMICK: I don't think Mr. Forrestal
considered he was addressing anybody on the committee,
sir; I think he thought he was addressing it to you,
just the U. S. side of the committee, sir.
H.M.JR: I understand it. Well, now, if you could
tell them about it, what the Admirality themselves said.
Is the Navy prepared to let the English have a copy of
what Mr. Forrestal sent me last night?
ADMIRAL McCORMICK: I think they would prefer not to,
sir, unless you think in the end we have to come out and
tell the British some dollar and cent values that we are
planning to use for planning purposes.
H.M.JR: What are we going to tell them?
ADMIRAL McCORMICK: We are going to tell them in
broad terms that the Navy Department will take due note
of their requirements.
H.M.JR: And will give them what they want?
ADMIRAL McCORMICK: With certain exceptions, we will
probably be able to give them what they want, but not go
into detail.
MR. WHITE: Wouldn't you indicate what the difficulties
are you anticipate with some of these items in your discussion
with them SO they would, in effect, have the substance of
this letter?
ADMIRAL McCORMICK: That is right. The question of
avoiding--entering into any signed agreement as the other
two committees have done--what we are trying to avoid is in
line with what they suggested themselves.
H.M.JR: Is it agreeable to you people to proceed
this way, that the Navy--you proceed 88 you think best,
and we will see where it gets us. Is that all right?
ADMIRAL McCORMICK: Yes, sir.
Regraded Unclassified
65
- 18 -
H.M.JR: It is all right with me.
MR. WHITE: I think certainly this letter should not
be made available until the Navy has had an opportunity
to reshape it with that in mind.
MR. GATES: They would reshape it with what in mind?
MR. WHITE: I didn't know; I gathered you felt this
was drafted for the Secretary's own information and that
if you were drafting any kind of a letter or document to
transmit to the British for their perusal or examination
it might not take precisely the same form. But hitherto,
you see, they have had such documents of this character
that have been made available on other areas.
MR. COX: Mr. Secretary, don't you think what is
causing them some concern is that the Admirality presents
certain views and says they hope that the Navy will give
due regard to them. They don't know whether the Navy
has given due regard and agrees in principle a hundred
percent or ninety-eight percent. I should think the
thing that might satisfy them if it is agreeable to the
Navy is to say they are proceeding along the lines of the
Admirality; they agree with the view, and they would like
to sit down and talk to them about the items that have
created the doubt, either by reason of supply, or something
else. Then you sit down and discuss specific cases on the
facts, which gives them an opportunity to listen, and also
comment if they have any comments.
MR. GATES: I understand that part has been done, has
it not, on the specific items?
ADMIRAL McCORMICK: We asked the British for details.
Of course, they came through with an item of a hundred
million dollars which was not in this paper, although they
mentioned that they would be prepared. I have talked to
Admiral Waller several times about the thing, but he is
in the dark.
H.M.JR: Can you at a subsequent meeting--are you
willing to sit down with them and tell them approximately
Regraded Unclassified
66
- 19 -
we are ready to supply them? I take it you have not yet
done that?
ADMIRAL McCORWICK: No, sir, we have not yet done
that.
H.M.JR: Is the Navy Department willing to do that?
ADMIRAL McCORMICK: I think they will in broad terms.
MR. GATES: Mr. Secretary, these items are in common
use to both of us, and as your strategy develops, it depends
on which force can better use them. It might be bad today
to give something which we might need ourselves next year.
It isn't a question of having enough for each.
H.M.JR: Isn't that going to be controlled through the
Munitions Assignment Board?
MR. GATES: It should be.
H.M.JR: That is the understanding. We have 80 notified
the British.
ADMIRAL McCORMICK: Yes, sir, that is the way it
will be controlled, but I think we all feel that if we
sign papers in dollars and cents that it is a little bit
of a commitment that we would like to avoid if we can.
H.M.JR: If you don't mind my being frank, I don't
think the Navy can take that position in view of this
Quebec agreement. I think everybody concerned is making
agreement subject to the material being available on the
decision of the Munitions Assignment Board at the time it
is ready for distribution.
ADMIRAL McCORMICK: I think that is what Mr. Forrestal
asked this. you the question about, whether the Navy could take
H.M.JR: I didn't quite understand that.
Regraded Unclassified
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- 20 -
MR. WHITE: Mr. Secretary, may I call your attention
to a sentence which they have réferred to which I think
is quite in point? The sentence the Navy referred to is
the important key sentence. (Hands the Secretary "British
Lend-Lease Requirements" Document.)
H.M.JR: I don't quite understand this: "If, there-
fore, we can be assured that the Navy Department will
take due note of the Admirality requirement when initiating
or revising production schedules, our Navy requirement
might be regarded as outside any arrangement of a protocol
character such as advocated in paragraph six." Do you
mind explaining that?
ADMIRAL McCORMICK: Well, I think they realize that
naval requirements are much more full than any other, sir,
and that ships move around and it is very hard to picture
exactly what they will be doing in any one year. So they
realize there that it probably wasn't particularly appro-
priate that we would have a more or less rigid, signed
agreement on the subject. That is why Mr. Forrestal
thinks that the British have already said they don't have
to sign it.
H.M.JR: Where in Mr. Forrestal's letter does he
ask for that?
(Admiral McCormick points out sentence.)
H.M.JR: "telling them the specific problems,
but not to mention the financial situation.
My answer to that specific question is--if it is
left to me--but I don't want to decide this alone. My
own personal feeling, talking for the Treasury, is that
they should mention the specific dollars.
Now, I would like to ask Mr. Acheson how he feels,
and then Mr. Currie.
Regraded Unclassified
68
- 21 -
MR. ACHESON: I should think most certainly they
should, Mr. Secretary.
H.M.JR: Have you seen this letter?
MR. ACHESON: No, sir, I haven't.
H.M.JR: I am sorry. It only came in last night.
Will you see that Mr. Acheson gets a copy? Is there
any reason why Mr. Acheson or Mr. Currie can't have a copy?
ADMIRAL McCORMICK: No, sir. I think they are really
asking for guidance on it.
H.M.JR: Let me read the paragraph out loud:
"The Navy Department is now prepared to inform the
British that in conformity with requests contained in
paragraph thirteen, page twelve, the British requirement
for the first year of page two, due note will be taken of
the Admirality requirement when initiating or revising
production schedules, in doing so, planning to set forth
general and specific conditions contained in this letter,
but not the financial consideration which I am including
herein for your information. Before our subcommittee
replies to the British, I would appreciate your informing
me whether this procedure is satisfactory to you."
In other words, we didn't allow enough time today. I
can't blame myself, so I have to blame Coe.
Anyway, my feeling is that as long as Mr. Forrestal
has asked, that they should.
Now, what is yours, Mr. Acheson?
Regraded Unclassified
1/s
69
- 22 -
MR. ACHESON: I don't see any reason why the Navy
shouldn't proceed exactly the way the Army and Air forces
and other people are proceeding, which is to get up a
joint recommendation, which is one which, if accepted,
can govern production schedules and the whole thing be
subject to the Munitions Assignment Doard when the time
comes for delivery.
Now, this sentence which the Dritish wrote here on
Page 12 was in the light of a request which they make over
on Page 14, that the Army items be a firm assignment.
That has already been turned down. There isn't going to
be any firm assignment. So that puts the Army on the
same basis as the Navy. I don't see how you get anywhere
if you just say we are going to take due note of every-
thing in this book. They don't know whether that "due note"
means you have turned it down or not.
If you have a joint recommendation that certain items
as far as Lend-Lease are concerned are ones which you would
put into production and hope to have available for the
British Navy, all of that is subject when the time comes
to diverting all of it to the United States Navy, or any
other use that the war calls for.
H.M.JR: Mr. Currie?
MR. CURRIE: I agree with Mr. Acheson. I think the
same procedure should be followed by ail the agencies. I
think we all have a distinct understanding that this is
most certainly not a protocol, that it must be fulfilled,
that it is subject to review and revision at any and all
times. That was clearly understood by the British.
H.M.JR: Mr. Patterson, do you care to express an
opinion?
MR. PATTERSON: No, I would rather not.
H.M.JR: Mr. White?
Regraded Unclassified
2/s
70
- 23 -
MR. WHITE: I agree with Mr. Acheson and Mr. Currie, and
I think that is what they intend to do. In fact, that is
what they have here. They are going to tell them the sub-
stance of those things which they think they can give them
and the reasons why they think they can't give them some
of the things, and they have in this letter, aside from
the first part which is addressed to you, I think, all that
the British can wish in the way of information, though
they will doubtless want to argue some of the details with
them.
A further notation, which I gather the Navy is making
a strong point of, is that there is much less certainty
with respect to Naval deliveries than there is with some of
the other items, that it is subject to much greater change.
I also gather that they intend to make the substance
of this available, so that I don't really see where there
is any difference of opinion.
MR. PATTERSON: When we listed our items with the
British on the two programs we had, we conditioned delivery
of all of them by a general clause that they were subject
to conditions at the time, and decisions of the Munitions
Assignment Board. That took it out, as it has been said,
of the firm protocol idea.
MR. WHITE: I don't see how the Dritish could take
anything less than this, because one of their points which
they are making through here is that they have to plan
their own production, so they have to have some idea of
what they can hope to have considered in planned production
for the United States. So unless they got some such infor-
mation they could take the position that they don't know
whether we sould try to produce these.
H.M.JR: Does anybody have a contrary opinion?
(No reply)
H.M. JR: Mr. Gates, are you willing to accept the recom-
mendations, or do you feel you have to go back to
Mr. Forrestal?
Regraded Unclassified
3/s
71
- 24 -
MR. GATES: I think I should go back to him. You
will notice in connection with your letter there on the
attachment, it goes into detail a little more on their
requirements and our comments as to where we are short
and our ability to meet those. I think that will show
you some of our problems.
H.M.JR: I mean, in order to give you an opportunity,
supposing I state it like this, that we have met, we have
discussed this question of the letter from the Navy to me,
and we hope to have an answer for them by Monday - by
tomorrow - on how they will proceed.
MR. GATES: Your Committee hopes to have an answer
from us?
H.M.JR: I will put it this way, "The Committee hopes
to be able to be in a position to discuss with the british
the question of these items." I will put it on the Committee
and not on you. Is that all right?
MR. GATES: It sounds all right to me.
H.M. JR: Can you see Mr. Forrestal tonight? Will he
be available?
MR. GATES: He was. He planned to leave town. He
was uncertain about it. If he is there I will certainly
see him when I go back, yes.
H.M.JR: You couldn't settle it over the phone?
MR. GATES: I can talk to him.
H.M.JR: Do you want to go in Mrs. Klotz' room now?
MR. GATES: All right.
H.M.JR: It puts me in a little awkward position to
have them come in, but if you could settle it SO you could
say to them, "We are ready to sit down with you"--
Regraded Unclassified
4/s
72
- 25 -
MR. GATES: As I understand it, it is your Committee's
recommendation that the Navy sit down with the British as
the other Committees have done and come to you with a joint
resolution and recommendation.
I will go and call him. (Mr. Gates and Admiral
leave the office temporarily)
MR. WHITE: Mr. Secretary, did you have any idea of
any special time when this has to be done? Do we have
anything to shoot at?
H.M. JR: Yes, the day before Thanksgiving! Do you
think we could have them in? I hate to keep them waiting.
What can we start on? We can simply tell them, on this
question of the Army, that we would like to postpone that
and refer it back to the Subcommittee?
GENERAL SOMERVELL: May I say something? You don't
mean to refer it back to the military committee?
H.M.JR: What I call a Technical Committee. It has
been composed of Mr. Cox, Mr. Currie, Mr. Acheson, and
Mr. White.
GENERAL SOMERVELL: Yes, that is all right, because
we can't do any more with it.
H.M.JR: Somebody sits on it for you, don't they?
MR. PATTERSON: I don't think so. I agree it is
entirely a fiscal matter if we are assured of the source,
and therefore we tender it to you (Mr. Acheson).
MR. TAFT: Plus the factor that Bob raised, and that
is your appropriation. In other words, the decision might
affect your appropriation, in which case you are very
much concerned.
MR. LOVETT: Yes, and we are under, then, the obliga-
tion to go into detail as to how and why we did this, and
so forth.
Regraded Unclassified
5/s
73
- 26 -
H.M.JR: I know you are in a hurry, Mr. Lovett. If
it is agreeable to Mr. Patterson, what I would like to do
is have you stay just long enough for us to settle this
thing that is going to be referred back on the technical
level. Then if you want to, just excuse yourself. It is
all right. Is that agreeable?
MR. PATTERSON: Yes, indeed.
MR. COE: Mr. Secretary, would there be any objection
to the Dritish stating their point or amplifying it? I
think they will want to talk about that Paper, against the
reservation which the Army and Air Force people made.
H.M.JR: Do you think that will give them an oppor-
tunity to cover up my ignorance?
MR. WHITE: No, it will give the Committee an oppor-
tunity later to discuss the matter more intelligently.
H.M.JR: Mr. Acheson, don't you think you could use
a man like that in the State Department?
MR. COX: With striped pants!
H.M.JR: Then the point is to ask them to discuss
this?
MR. COE: And I should say let the Army and Air Force
say what they want to, too.
H.M.JR: All right with me.
MR. LOVETT: Do you want to do that, really, sir? I
thought your idea was to avoid trying to compose the matter
today by reference to the Technical Committee. If you have
them in and they state a case, and then we are asked to
respond, we are trying it before you right here.
H.M.JR: I think that is a mistake and that is what
I am trying to avoid. I am glad Mr. Lovett raised the point.
Regraded Unclassified
6/s
74
- 27 -
I am trying to avoid a free-for-all discussion with the
British until the Americans are together.
MR. WHITE: You could avoid that by just having them
talk about this without having the army express their side.
The alternative, Mr. Secretary, is to say hello - good-bye.
That may be all right.
H.M.JR: What is the matter with that?
MR. WHITE: That may be just the thing to do.
H.M.JR: That would be my impression, subject to
advice.
MR. ACHESON: what was his advice?
H.M.JR: Hello and good-bye.
MR. ACHESON: I think that is fine! (Laughter)
MR. PATTERSON: We can perfectly well say to them
that their Paper has been received ard we have had dis-
cussions and we have decided to refer our side of it to a
technical subcommittee. There is no use going into an
argument about it.
H.M.JR: And that our technical subcommittee will be
in contact with them.
MR. GATES: That is all right, yes. We will sit down
with the British and try to arrive at an agreement and
make recommendations to your Committee.
MR. WHITE: There is the answer.
MR. CURRIE: Mr. Secretary, after you say hello and
good-bye, if you would like to suggest--
H.M.JR: We can say more than that, we have the Navy
now; we have a piece de resistance.
Regraded Unclassified
7/s
75
- 28 -
MR. CURRIE: But if you would like to have an adjourn-
ment meeting for a preliminary discussion of some additional
information, we would like to have on the balance of pay-
ments in connection with Chapter 3 items, we can spend ten
or fifteen minutes discussing some of those considerations
with them.
MR. WHITE: Yes - it is not necessary.
H.M.JR: I sort of subscribe to the "hello-good-bye"
theory. I notice Mr. Lovett has an engagement. is that
Congressional, or something?
MR. LOVETT: I am all right. I am fresh from the
Multilateral Post-War Convention in Chicago, and I promise
you, this is a great relief!
Regraded Unclassified
76
AGENDA FOR U.S. MEETING
1. Air Requirements -
The report of the Subcommittee, consisting of U.S. Army Air Force
and Navy officials, and British Air officers, will not have been
seen by the other members of the American Committee. It might
therefore be in point to inquire of the Britich and American
officials who have worked on this side of the program whether
there are any problems which they wish to bring before the
Committee. As you know, the British wish to bring up the
reservation concerning reciprocal aid. If that problem is
disposed of satisfactorily, the top committee can presumably
accept the report.
2. Navy Program -
Secretary Forrestal has written a letter describing the conditions
on which our Navy will accept a proportion of the British requests.
He has requested that you, or this Committee, advise whether these
assumptions are correct. The letter is brief and if distributed
at the American meeting, it should be possible for the American
officials to pass upon it quickly.
AGENDA FOR BRITISH MEETING
1. The Agenda for the British meeting consists of items 1
and 2 above. Keynes (for no. 1) and Sir Robert Sinclair,
(for no. 2) have definite points they wish to make and it
would seem appropriate to call upon them first. In connection
with the air program, you may wish to emphasize the great
degree of agreement which has been reached quickly.
Regraded Unclassified
No. 22.
A.
77
TOP SECRET
COPY NO. 19
C.C.L.L. (44)1
3rd November, 1944
COMBINED COMMITTEE ON MUTUAL LEND-LEASE AID BETWEEN THE U.S.AND U.K.
GROUND ARMY AND AIR AND FLEET AIR ARM RECOMMENDATIONS
Note by U.K. members
On behalf of the British Group I hope that the recommend-
ation of the U.S. Representatives in Clause 11 can be worded rather
differently for it would be constitutionally impossible for us to
implement any such condition in its present form. When a similar
clause was mentioned in the proposals relating to supplies for the
ground forces, I pointed out that it raised wider matters, and the
matter was left open.
Reciprocal Aid from the Dominions is governed by separate
Reciprocal Aid Agreements with the U.S. Government, to which the
U.K. Government is not a party. So far as we know these Agreements
are working very well, and no case has been reported to us in which
any difficulty has arisen. We have no reason to think that the
Dominions are not ready to reaffirm their existing commitments.
If there are questions relating to Reciprocal Aid with
India or the Dominions which the Committee wishes to see discussed
with the Governments of these countries, I suggest that such
discussion should be entered upon through the proper channels
between the U.S. Government and the Government from which the
Reciprocal Aid in question is being asked.
Meanwhile the British group ask that the recommendations
both of the ground Army and of the Air and Fleet Air Arm Agreement
be accepted with the deletion of clause 10 in the Ground Army
Agreement and of clause 11 in the Air and Fleet Air Arm Agreement.
Regraded Unclassified
78
COPY NO. 39
TOP SECRET
C.C.L.L. (44) 5th Meeting
COMBINED COMMITTEE ON MUTUAL LEND-LEASE AID
BETWEEN THE U.S. AND U.K.
MINUTES of a Meeting held in Mr. Morgenthau's Room
in the U.S. Treasury, on 3rd November, 1944
at 3:30 p.m.
PRESENT
Mr. Morgenthau (In the Chair)
U.S.Representatives
K.Representatives
Mr. Acheson
Lord Halifax
Mr. Taft
Rt. Hon. Ben Smith
Lord Keynes
Dr. White
Hon. Brand
Mr. Casaday
Sir Robert Sinclair
Mrs. Klotz
Sir Henry Self
Mr. Opie
Mr. Currie
Mr. Cox
Mr. Coe
Mr. Angell
Mr. Davidson
Mr. Gates
Admiral McCormick
Mr. Patterson
Mr. Lovett
General Somervell
Colonel Stewart
Mr. Lee
on
)
Joint Secretaries
Mr. Coe
)
1. REPORT IN NEW YORK TIMES
MR. MORGENTHAU said that the U.S. representatives had
been giving some thought to the question of whether an official
statement ought to be issued in view of the story by Arther Krock
which had appeared in the New York Times. The conclusion had,
however, been reached that in view of what had been said by the
President at his Press Conference earlier in the day, the best
course would be to issue no statement.
2. RECIPROCAL AID FROM THE DOMINIONS AND INDIA
MR. MORGENTHAU said that the U.S. representatives had
given some preliminary consideration to the paper (CCLL(44)1)
which the U.K. representatives had circulated earlier in the day.
They had not, however, been able to reach considered conclusions
on the subject and he thought that the most satisfactory
arrangement would be if the questions raised in that paper were
examined by representatives of both the U.S. and the U.K. at
Sub-Committee level.
79
3.
U.K. NAVY REQUIREMENTS.
MR. MORGENTHAU said that the U.S. Navy Department was
now prepared to discuss with the U.K. Naval representatives the
detailed requirements which the U.K. had put forward, with a view
to making agreed recommendations to the Main Committee. It would
be appropriate if Admiral Waller could now get into touch with
Admiral McCormick so as to arrange for such detailed discussions
to be begun. ADMIRAL McCCRMICK said that the Navy Department had
first considered that it would be better to reach certain broad
conclusions before examining the programmes in detsil: They were
now, however, prepared to follow the procedure indicated by the
Chairman.
4.
U.K. AIR AND FLEET AIR ARM REQUIREMENTS.
SIR ROBERT SINCLAIR referred to the combined report on
the U.K. Air and Fleet Air Arm requirements which had been
submitted to Mr. Morgenthau on the 3rd. November
He said that on behalf of his colleagues he would wish
to place on record his appreciation of the way in which the
discussions leading to the agreed recommendations in the report
had been conducted, It was particularly satisfectory that, as
in the case of the Ground Army requirements, there had been a
full and frank discussion of the operational basis upon which the
U.K. needs had been framed and that there had been no disagreement
as to that basis,
Sir, Robert went on to say that if regard were had to the
fact that a sum of $200 million had been earmarked in the Air
programme for spot items and contingencies, there was comparatively
little difference between the U.K. demands as originally put
forward and the recommendations in the agreed report. On the
other hand, in the field of the Fleet Air Arm requirements there
was a serious disparity between the U.K. requirements and the
acceptances as set out in the report, particularly in two types
of aircraft: Corsairs and Avengers. The U.S. representatives
had, however, indicated that circumstances might arise in the
future which might make it possible to allocate additional
quantities of Corsair and Avenger aircraft to the United Kingdom.
The U.K. representatives would therefore wish to suggest that a
sum of 375million should add to the total of the financial
provision as put forward in the report in order to give financial
cover for such a contingency, Sir Robert emphasised that the
provision to the United Kingdom of additional Corsair and Avenger
sircraft would be of great operational importance since there was
no production in the United Kingdom of torpedo carrying carrier-
borne aircraft with performances comparable to that of the Corseir
and the Avenger.
There was some discussion on the question of whether
there would not be adequate financial cover against the circum-
stances which Sir Robert Sinclair had in mind in the sum of $200
million which had been earmarked in the sir programme to cover
contingencies and spot items. Sir Robert Sinclair said, however,
that of that sum $130 million represented cover against the
possibility that B-29's would be made available to the United
Kingdom at a later stage, while the balance of $70 million was
intended to cover spot requirements particularly in the radar
field where the incidence of spot requirements and new developments
was apt to be heavy. It was finally decided that the question of
whether an additional sum of $75 million should be set aside, as
urged by Sir Robert Sinclair, should be referred back for
consideration by the Combined group which had produced the report
on the Air and Fleet Air Arm requirements.
-2-
20
Sir Robert Sinclair said that he wished to make two
other observations on the report of the Combined Group:-
(a) Paragraph 7 of the report (stating that the
detailed scheduling of radar equipment
and components would be proceeded with as
soon as possible) was of particular importance
to the United Kingdom since the U.K.
production in the radar field was very
dependent upon the provision of components,
etc., from the United States. The U.K.
representatives hoped, therefore, that a
detailed monthly schedule of deliveries
could be worked out as soon as possible.
(b) It would be appropriate to make a brief
reference to the requirements of the
Australian and New Zealand Air Forces.
Since those forces were operating in
spheres of U.S. strategic responsibility,
no details of their requirements had been
included in the programmes dealt with by
the Combined Group. He was glad to say,
however, that he understood that as a
result of discussions between the U.S.
Departments concerned and the Dominion
representatives, no difficulty was likely
to arise in this field,
MR. MORGENTHAU said that the American Group
would note and consider the points made by Sir
Robert Sinclair.
5.
TOTAL OF U.K. REQUIREMENTS.
LORD KEYNES said that it might be of interest to the
Committee if he mentioned that, as 8 result of certain modificat-
ions in the programmes of requirements and of changes due to the
repricing of certain items, the total cost of the U.K. programmes
in both the munitions and non-munitions field now appeared to
be nearer $5 billion than the original figure of $6 billion.
This revised figure was exclusive of (i) any additions to Lend-
Lease programmes which might arise as a result of the consideration
of the proposals in Chapter 3 of the British case (11) certain
financial provisions on the munitions programmes for contingencies,
spot items, delivery charges and the like.
(Signed) Mr. Lee
Mr. Coe
Washington, D.C.
7th. November, 1944
-3-
81
November 3, 1944
4:00 p.m.
BRITISH LEND-LEASE NEGOTIATIONS
Present: Mr. White
Lord Halifax
Mr. Acheson
Lord Keynes
Mr. Patterson
Mr. Ben Smith
Mr. Casaday
Mr. Brand
Mr. Currie
Mr. Opie
Mr. Coe
Mr. Lee
Mr. Gates
Sir Robert Sinclair
Mr. Taft
Sir Henry Self
Mr. Angell
Mr. Lovett
Colonel Stewart
Admiral McCormick
General Somervell
Mr. Cox
Mrs. Klotz
Mr. Davidson
H.M. JR: May I say I am very sorry that this story
broke today in the New York Times. I had hoped that we
wouldn't have any leaks, but our luck has sort of run
out. And talking in view of what the President said in
his press conference today about this, we are not propos-
ing to make any statements. I think it would be a little
simpler if your press people at the Embassy didn't refer
all the reporters to us!
LORD HALIFAX: You mean not refer them all to you!
H.M.JR: Yes. I gathered that Mr. Brand was telling
them they could get something from the Treasury or the
White House. Well, they are not going to get anything
from the Treasury, and I doubt they willget anything
from anybody else. But there is no statement in view of
what the President said.
LORD KEYNES: What did he say?
Regraded Unclassified
82
- 2 -
H.M.JR: The question the President was asked was,
"Mr. President, any comments, please, on the published
report that Great Britain seeks certain Lend-Lease
supplies of & non-military nature for resale?"
The President's answer was, "I never heard of it."
So in view of that, there will be no statement forth-
coming from here. So I say it is very unfortunate. But
we only have four more days to go.
Gentlemen, I apologize for holding you up, but we
didn't allow time enough for this important discussion.
But in regard to this Paper you have given us on mutual
Lend-Lease between the U.S. and U.K., ground Army and
air fleet, air arm recommendations, we very carefully noted
this Paper and we have spent almost an hour here discussing
it. The result is that, frankly, we have not come to an
agreement among ourselves. And therefore the Committee
has referred it back to what we call our Technical Committee
and the Technical Committee will discuss it and will be
in touch with what, for lack of a better name, we call
your technicians.
So if you willbear with us, we are not prepared to
discuss it because we are not of one mind among ourselves.
LORD KEYNES: Is there any further explanation,
Mr. Secretary, we can give?
H.M.JR: I am sorry, Lord Keynes, not now, because I
am afraid to get into a discussion, and I don't want to
discuss it when there isn't united agreement among ourselves.
But our Technical Committee will meet, will talk it over,
and will be in touch with you gentlemen. out as I say, we
have been an hour trying to come to an agreement and haven't.
Now, that doesn't mean we could not agree. I don't want
you to go away thinking this is an insurmountable barrier,
but it is just that we should have allowed half a day and
we allowed half an hour. So, if you will bear with us, I
know the members of our Technical Committee will pretty
promptly be in touch with you gentlemen.
Regraded Unclassified
83
- 3 -
As I say, please don't go away thinking this is
something insurmountable. So, if you don't mind, we
need more time.
If this is agreeable, Mr. Patterson and his associates,
I think, are anxious, they have other work - we would be
glad to have you stay, but if you want to go, why that is
all right. (Gen. Somervell, Mr. Patterson and Col. Stewart
leave the conference)
Now, as to this much-discussed letter of Mr. Forrestal's,
I received it late last night - and you can correct me,
Mr. Gates - the Navy is now prepared to sit down and dis-
cuss with representatives of the British Navy, their re-
quirements.
Is that stating it correctly, or would you rather put
it in your own language?
MR. GATES: That is right. That is my understanding.
we will come to whatever agreement we can and make our
recommendations to your Committee the same as the other
Committees have done.
MR. SINCLAIR: Might I ask, Mr. Secretary, would
Mr. Gates like Admiral Waller to get in touch with some-
one?
MR. GATES: I suggest he get in touch with Admiral
McCormick.
H.M.JR: But this is open for any discussion now that
you gentlemen would like.
MR. SINCLAIR: I think the first step is to do what is
suggested, if I may say so, Mr. Secretary, to discuss the
situation.
H.M.JR: Mr. Gates, you and Admiral McCormick are
ready any time?
MR. GATES: That is my understanding, yes, Mr. Secretary,
we are.
Regraded Unclassified
84
- 4 -
LORD HALIFAX: Sounds all right, doesn't it?
H.M.JR: This may sound very short to you, but we have
been one hour on this Paper here and could come to no agree-
ment, but at least I think we have made real progress as
far as the Navy is concerned.
But if there is anything else that any of you want to
raise, this will be a good time to do it.
MR. GATES: Mr. Secretary, Admiral McCormick has just
brought up a point and that is that we, the American Navy,
were working originally according to the suggestion con-
tained in your Paper, that these subjects may be considered
broadly and be duly noted. That is the basis we have been
going on up until this afternoon when we had our meeting
with you - just to clarify our position a little further
on that.
MR. SINCLAIR: Would it be in order, Mr. Secretary,
to comment on the Air agreement now, apart from that
question that you already referred to?
H.M.JR: Well, they have all gone.
MR. GATES: If there is anything in fleet air--
M.L. SINCLAIR: I was proposing to make one or two
comments on the main agreement, if they are not inappro-
priate.
H.M.JR: Make your comments and then I will--
MR. SINCLAIR: Well, I wanted first of all to acknow-
ledge, as we did in the case of the ground Army, our
appreciation of the way in which these discussions have been
conducted, and to state again, as was the case with the
ground army, the fact that the military basis of our needs
was fully and frankly discussed. And there is no point of
difference to be recorded on that. In certain cases our
basis was modified in the course of discussion, and in
others, notably the fleet air arm, I think acceptances
really fall below our requirements.
Regraded Unclassified
85
- 5 -
The difference between our requirements and the
acceptances is in the Army aircraft type equipment
a comparatively small percentage, if the relatively large
item of two hundred million dollars referred to in para-
graph nine is taken into account. But a large part of
that two hundred million dollars may be required if cer-
tain aircraft, for example, the B-29, on which no commit-
ment or acceptance can be made at present, can later be
made available.
But in the case of aircraft for the fleet air arm,
there is a very serious disparity between our requirement,
on the one hand, and acceptances on the other. That
applies particularly to two types, the Corsair and the
Avenger.
We realize the uncertainties which make it impossible
in the judgment of the Navy Department to accept larger
quantities than those stated in the schedules at this
stage. They have, however, assured us the quantities now
accepted are minimum quantities and it is conceivable that
circumstances may arise, for example, the greater use by
the U.S. Navy of Hell-Divers and Avengers, which would make
it possible, without prejudice to the operation by the U.S.
Navy, to allocate to the Dritish a larger proportion of
those types.
And although it may be going too far to expect that
in that event the whole of the gap may be bridged, we suggest
it would be wise to include in the total financial provision
over and above the amount stated in the schedules, an
amount of seventy-five million dollars as financial cover
for any such possibilities.
In making this suggestion we realize that it carries
with it no commitment on the part of the U.S. Navy Depart-
ment beyond that which has already been clearly implied
in the discussions that are taking place: Namely, that if
circumstances should change and additional quantities of
these types do become available, they will be allocated to
the British.
Regraded Unclassified
86
- 6 -
We mentioned this to the Navy Department before this
meeting and after seeing the report, and I hope that
Mr. Gates will confirm they have no objection to that
suggestion.
I ought perhaps to add that we have not got in pro-
duction in the United Kingdom any torpedo carrier opera-
tors, carrier-borne aircraft of comparable performance to
the Avenger, and the new version of the Barracuda does
not come into production in September.
The position with which we are faced, with which our
Admiralty are faced in that regard, is a serious one, and
I would be less than fair to them if I did not make that
point very clearly at this meeting.
I don't know whether you have had an opportunity of
considering that, Mr. Gates?
MR. GATES: I have not had an opportunity of consider-
ing it. I only heard indirectly that there is a possibility
just being discussed at some point.
Just to clarify myself, you are proposing adding on
the Air program seventy-five million dollars to the two
hundred million dollars that you already have, for contin-
gencies, making that two hundred and seventy-five million
for contingencies.
MR. SINCLAIR: That is right, but--
MR. GATES: Doesn't the two hundred million cover
both Army and Navy?
MR. SINCLAIR: No, it was originally - the two hundred,
in fact, was discussed and agreed on the Army aircraft side,
do you see? Then the fleet air arm discussions took place
subsequent to that, and the extent of the shortage, diffi-
culties with regard to Avenger and Corsair, were not realized
at the time that the two hundred million was discussed.
Regraded Unclassified
87
- 7 -
Now, we quite realize that on present plans by the
U.S. Navy there are not additional aircraft likely to be
made available, but there are certain contingencies in
which they might become available, and we are asking that
if those contingencies arise--
MR. GATES: That is right. There is a possibility
of the program increasing. I had misunderstood that. I
thought that the two hundred million dollars was to cover
both the Army and the Navy requirements, and from what I
knew of it, it seemed to me that was sufficient.
MR. SINCLAIR: One hundred and thirty of the two hun-
dred, you see, is represented by the B-29 alone, which the
Army air force wants us to leave on one side because of
their current difficulties with that type, do you see?
So you have seventy to cover certain difficulties in the
radar field because of changing of types. That amount
was discussed in relation to radar on the Army air ground
side.
H.M. JR: Might I interpose - you are way beyond my
depth - aren't these just the kind of things that you are
going to sit down and discuss with the Navy and try to
get together?
MR. TAFT: No, this is the Air, Mr. Secretary.
MR. GATES: It has been agreed on, and the letters
have come in to you. This is just adding another item.
I am not prepared to answer for us on this, Mr. Secretary,
now.
H.M.JR: Will you take it under consideration?
MR. GATES: Yes. It means going back to Mr. Patterson
and Mr. Lovett and all signers to this agreement that we
have already agreed on, to add another seventy-five million
to it.
MR. WHITE: Mr. Gates, might one interpret that addi-
tional amount for contingencies to cover an expenditure
Regraded Unclassified
88
- 8 -
on anything, or was it certain specified types - parts?
What is the interpretation?
MR. GATES: I thought the two hundred million covered
contingencies for airplanes and accessories and parts, and
I thought within that two hundred million there is enough
leeway to take care of any increased planes for the fleet
air arm. If I am wrong, I was misconstruing it.
MR. WHITE: Sir Robert, is your interpretation of those
contingencies in terms of specific items, or much more
general?
MR. SINCLAIR: It is worded completely generally,
Dr. White. In the course of discussion of the amount,
the point was made that about one hundred and thirty
might be required in the event the B-29 situation cleared.
The remaining seventy was considered on both sides a reason-
able amount for radar contingencies. That was the under-
standing in the discussion. The fleet air arm discussions
were subsequent to that discussion. We didn't know at that
time the degree of the short-falling there would be in
those two rather important types of the fleet air arm.
If allocations, of course, can subsequently be made,
we are doing no more than use a part of the provision that
is now made. This amount is not spent until there is a
clear case for doing SO. Only we all thought it would be
wise, in view of this situation--
MR. GATES: You think you will need seventy million -
we are getting into some details - seventy million over and
above the two hundred million already allocated?
MR. SINCLAIR: Radar and components.
MR. GATES: There is two hundred million allocated to
that now.
MR. SINCLAIR: They do from past experience find in
this radar field that new types are being developed so
Regraded Unclassified
89
- 9 -
quickly - that applies to the forces of both nations -
they are continually changing, scrapping old types and
bringing in new ones.
MR. ACHESON: Mr. Secretary, may I ask whether this was
all discussed by the Committee which has reported? has this
all been taken up and thrashed out?
MR. SINCLAIR: No, sir, the Committee which has re-
ported did not discuss this item at the time of signing
the agreement, or at the time the agreement was forwarded
to us. lie were left with this very substantial short-fall
which was in discussion up to the very last moment, do you
see? And when we saw the extent of it and obtained from
the Admiralty their view as to what would be the inevitable
consequence, we considered it was desirable to include
this additional provision that I mentioned.
LORD KEYNES: Isn't this something which has to go
back to the Committee?
MR. SINCLAIR: We did put that to the Navy Department,
but I am afraid Mr. Gates was away in Chicago at the time.
We put it to the Navy Department as the only thing we could
do in the circumstance, giving the intimation that we would
like to raise this point at this meeting.
But we are very happy to discuss it further, Mr. Secretary,
if you would like that.
H.M.JR: Well, that is up to you, but I think it should
be raised at the lower level, if you don't mind, because
it has me very much - to make a pun - in the air! I just
can't quite follow it. There is no reason why you shouldn't
raise it.
Is that what you think, Mr. Acheson?
MR. ACHESON: Yes, I was trying to get clear as to
whether this was an appeal from a decision already made,
or something omitted from the discussions.
Regraded Unclassified
90
- 10 -
H.M.JR: I gather it is an afterthought.
MR. SINCLAIR: Yes, 1 hoped it would be regarded by
the Navy Department as a wise precaution under the circum-
stances.
MR. GATES: I will be glad to go back to this Committee,
Mr. Morgenthau, and ask if they won't reopen their agreement
and consider this additional seventy-five million.
H.M.JR: I take it it is really an afterthought, isn't
it?
MR. GATES: There is a little difference of opinion
on that. We thought at the time the two hundred million
covered the Navy contingencies as well as the Army.
MR. SINCLAIR: May I make two other points, Morgenthau,
very briefly? I would like to call attention to the impor-
tance of paragraph seven, in which it is stated that the
detailed scheduling of the components and the radar will
be proceeded with as soon as possible.
1 would like this Committee to appreciate that the
United Kingdom program is to a large extent dependent upon
the supplies of components and considerable equipment such
as radar which we get from this country. Therefore, this
paragraph in the agreement is of very great importance to
us and we have every reason to believe that the service
departments here, both the War Department and the Navy
Department, will cooperate fully with us in arriving at a
detailed schedule of monthly deliveries as soon as possible.
The other thing which I perhaps ought to make clear
is that in Chapters 1 and 4 of our general case, reference
was made to the effect the Australian and New Zealand
air forces, operating as they do, in a sphere of United
States strategical responsibility, cannot be included in
such an agreement as this, and that their requirements
would be the subject of direct discussion between them
and the United States.
Regraded Unclassified
91
- 11 -
Well, we are, of course, interested observers in
this matter, and I thought it would be appropriate to
say here that from the discussions that have already taken
place it appears to be clear that no difficulty under that
heading is likely to arise. I thought I ought to clear
that point, because we had referred to it.
H.M.JR: If the respective secretaries will note what.
Sir Robert has said, we will give it due consideration.
MR. SINCLAIR: Thank you very much, sir.
H.M.JR: Anything else, Sir Robert?
MR. SINCLAIR: No, sir.
H.M.JR: Lord Halifax?
LORD HALIFAX: I have nothing.
LORD KEYNES: Mr. Secretary, there is one point
which I think might be of some interest to report. Our
original proposal in the big book came to just over six
billions, compared with ten billions on a comparable
basis. Well, now we have cut down our oil requirements
and the shipping. The ground agreement which is passed
and this Air one, certain items have been cut out and
certain others the prices have beenchanged. We thought
it would be useful to compile a statement showing what
effect it has had on our total application. It appears in-
stead of being around six, that on a comparable basis
it is rather less than five, now. If you then add
on the things that went into the six, namely, certain
transport charges and these spot margins for unspecified
items, then it is a little more than five. But as com-
pared with the six, very nearly a billion has disappeared
for one reason or another. So we are now thinking in
terms of five plus, and not six plus.
MR. WHITE: That is what we read in the Times this
morning!
Regraded Unclassified
92
- 12 -
LORD KEYNES: Except it isn't on those items, unfor-
tunately. (Laughter)
I thought it would be interesting to know. And, of
course, that doesn't allow for any changes there, maybe,
in certain other programs. But I think it doesn't cover
the Navy, which we haven't dealt with, but I think, other-
wise, it is probably fairly near the final figure. It is
on the order of five, and not on the order of six.
H.M.JR: That is good news.
Is there anything else, gentlemen? Then we stand
adjourned.
Regraded Unclassified
CELL
u.s. No. 29
Ricd 11/6/44
S3
TOP SECRET
COPY NO. 20
LEND LEASE IN STAGE II
NEW ZEALAND
Attached below are (1) a quantitative analysis of
the requirements already tabled for New Zealand under Lend Lease
for the first year of Stage II; this quantitative analysis is
tentative and subject to adjustment between items according to
the circumstances applying at the time of requisition: and (2)
a further memorandum indicating the manner in which New Zealand's
requirements would be increased if the civilian and capital goods
rules could be relaxed.
(Signed) A,W.Snelling
Washington, D.C.
3rd November, 1944
Regraded Unclassified
84
QUANTITATIVE ANALYSIS OF NEW 2EALAND REQUIREMENTS ALREADY TABLED.
Following are the commodities and actual quantities used to
arrive at the dollar figures outlined in "Amplification of
Material in Chapter 4: Lend Lease Requirements of Australia,
New Zealand and India":-
Material
Quantity
Value
Total
Carbon Steel
43,750 tons
$3,500,000
Tinplate
16,000
"
2,000,000
$5,500,000
Phosphate
40,000 L.T.
240,000
240,000
(In view of the improved
shipping situation, it is
conceivable that nearer
60,000 L.T. valued at
$360,000 will ultimately be
shipped from U.S.A.)
Sulphur
50,000 L.T.
760,000
Miscellaneous Fertilizers &
Chemicals
Fertilizers
Muriate of Potash
5,000 S.T.
170,000
Potassium Sulphate
500 ni
20,000
Chemicals
Sodium Chlorate
500
"
95,000
Methyl Ethyl Ketone
13
If
2,700
White Arsenic
100
II
10,000
Metachrome Mordant
26
If
10,000
Tanning Extracts
77
If
8,000
Caustic Potash
60 "
10,000
Nicotine Sulphate
25
"
56,000
Methyle Isobutyl Ketone
30
"
7,000
Stayco "A"
26 If
3,000
Rubbermakers Refined
Sulphur
100
"
4,500
Formaldehyde
88
=
11,700
Miscellaneous
40,000
450,000
Naval Stores
Pine Tar Retort
116 "
17,400
Losin 011
45,000 gals.
30,000
Turpentine
138,000
"
83,000
Gum & Wood Rosin
1,200 S.T.
120,000
250,000
Miscellaneous Raw Materials
Carbon Black
500 S.T.
115,000
Dextrine
116 "
11,800
Filter Earths
40 If
1,500
Refractory Material
242 "
25,000
Diatomaceous Earth
216 "
10,000
Miscellaneous
50,000
250,000
Tobacco
1,950,000 lbs.
1,250,000
Manufactured Items
Trucks
795 Units
1,000,000
Automotive Parts
1,000,000
Agricultural Equipment
comprising:
3,000,000
Regraded Unclassified
95
Material
Quantity
Value
Total
1583 Tractors
30 Disk Plows
720 Attachments for
438 Garden Tractors
1022 Mowers
Cultivators
1067 Haying Machine 1271 Garden Tractor
Attachments
Cultivators
TRACTOR ATTACHMENTS
242 Hydraulic Attachments)
471 Haybalers
150 Other Planting,
613 P.T.O.
)
25 Hay Loaders
Weeding, etc.
6 Pairs Wheels
)
218 Cultivators
150 Furrow Openers
10 Pulley Assemblies
)
10 Planters
87 Harrows
48 Cornshellers
24 Distributors
152 Tractor Hoe Lis-731 Seeders
ters
24 Broadcast
Seeders
TRACTOR SPARES
241 Combines
165 Engines
193 Power Sprayers
575 Mouldboard Plows
313 Dusters Hand
2 Transplantors
MACHINE SPARES
6 Weeders
3 Onion Pullers
2 Topper Graders
Hund Tools
700,000
Miscellaneous Items
375,000
ADDITIONAL ITEMS FOR NEW ZEALAND
1.
The Application of the Civilain Goods Rule
In submitting a list of additional material which
New Zealand might obtain from the United States if the civilian
goods rule was relaxed to take care of material essential for
the national economy of New Zealand, it is necessary, first of
all, to stress the inevitable delays in procurement resulting
from the protracted negotiations involved in determining the
percentage of any requisition which may be approved by the
Foreign Economic Administration.
One example is a recent requisition for Carbon Black
which has been held up for some time in order to determine
civilian percentage. In this particular case the civilian
percentage works out at 8 per cent. of the total quantity
covered by the requisition leaving the balance of 92 per cent.
to be procured under Lend Lease. This illustration is very
simple as the material does not cover any wide range of types
or specifications. In the case of some other materials where
articles requisitioned are components or parts to be used in
production of certain materials, # is difficult to determine
the percentage of "civilian use". Supplies and parts of, say,
miners' safety lamps for coal-mines would be such a case.
The civilian percentage of coal produced can be determined but
carrying the "percentage formula" down to supplies and parts
of safety lamps introduces a meticulous factor of calculation
which causes serious delays.
Although this aspect has already been mentioned in
the case previously submitted no allowance has been made for
relaxation of present rulings. If the civilian goods formula
were amended these estimates of New Zealand's requirements under
- 2 -
Regraded Unclassified
06
Stage II would be increased by $4,000,000. The principal item
would be tobacco - 4,000,000 lbs. value $2,500,000, the balance
being made up of raw materials which are at present excluded
under the civilian goods formula, e.g. steel, sodium chlorate,
potassium sulphate, white arsenic, tanning extract, caustic
potash, nicotine sulphate, metachrome mordant, stayco A, rosin
oil, pine tar oil, turpentine, gum rosins, rubbermaker's refined
sulphur, carbon black, dextrine, filter earth, dintomaceous
earth, formaldehyde, refractory material, bitumen and other
miscellaneous raw materials.
2. The Application of the Capital Goods Rule.
The application of the capital goods rule seriously
affected New Zealand. As had been pointed out New Zealand has
no heavy manufocturing industries and it is necessary to import
most types of machinery required in the Dominion. A specific
example regarding this is e demand received for heavy equipment
for the New Zealand Navy Dockyard at Auckland which services
United Nations naval craft and also morchant vessels. Demands
totalling approximately $400,000 were approved by the United
States Navy representativos in New Zealand and despatched through
United States Navy channels to Navy authorities in the United
States. After considerable delay these demands were passed by
the Navy Bureau of Ships to the New Zealand Supply Mission,
Washington, for procurement as the items were mainly outside
the normal types of materials ordered by the United States
Nevy. These demands were under action in late 1943 and two
small requisitions to the value of $7,500.00 were approved for
Lend-Loase, The introduction of the November 1943 capital goods
rule specifically excluded the balance of the demands from
Lend-Lease procurement, despite the und use of the materials.
Subsequently cash procurement was effccted in the United States
for $66,500 and in Canada under Canadian Mutual Aid for a value
of $30,000, leaving et the present timo machinery valued at
$207,000 still under action.
A most serious aspect of this particular case has
been the long and continued delays encountered in the supply
of this material, all of which is for essential war purposes.
At the present time no satisfactory estimate can be
made of the amount that would be involved if the capital goods
ruling were relaxed. Full information as to strategical commit-
ments in Stage II is not at present available, and the matter
would require reference back to New Zealand before detailed
figures could be produced.
3
Nov. 3, 1944
TO:
97
Secretary Morgenthau:
Mr. Gaston handed this
to me and asked me to advise
you that Mr. Shaeffer had
told the British Embassy not to
refer the reporters to the
Treasury again.
P.B.M.
From: Mr. FitzGerald
98
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO Mr. Gaston
FROM Mr. Shaeffer let
November 3, 1944
Mr. Daishes of the Information Office of the British
Embassy, informed me that the Honorable R. H. Brand, "Head
of the United Kingdom Treasury Delegation" was the person
responsible for spreading the report that either the Treasury
or the White House would issue this afternoon, or this
evening, a statement on various problems including comments
on Krock's story in today's New York Times.
Daishes said Brand had given this report to at least
a dozen newspaper reporters following a conference this morning
with unnamed officials of the Treasury. Incidentally, Daishes
informed me the Embassy is being swamped with queries on the
matter.
Regraded Unclassified
11-3-44 99
Min Decken see
VERBATIM
CORRESPONDENT:
Mr. President, any comments please on the
published report that Great Britain seeks
certain lend-lease supplies of a non-military
nature for resale in their own export trade?
PRESIDENT:
Never heard of it, never heard of it.
CORRESPONDENT: It was in the New York Times this morning.
PRESIDENT:
I'm sorry.
Regraded Unclassified
NOV 3
100
1245
-
LENDLEASE
WASHN - AP- - PRESIDENT ROOSEVELT SAID HE
HAS NEVER HEARD OF A STORY THAT THIS COUNTRY
IS CONSIDERING GIVING GREAT BRITAIN
2 500 000 000 DLS OF NON-MILITARY SUPPLIESX FOR
EXPORT RE-SALE
THE NEW YORK TIMES PUBLISHED TODAY A
STORY SAYING MR ROOSEVELT AND HIS ADVISERS HAVE
THE PLAN UNDER CONSIDERAT ION AND ARE DISCUSSING
IT WITH A BRITISH DELEGATION HEADED BY LORD
KEYNES
WHEN MR ROOSEVELT SAID HE NEVER HAD HEARD
OF THE STORY A REPORTER TOLD HIM IT APPEARED
IN THE TIMES THIS MORNING - THE PRESIDENT
REPLIED ONLY THAT HE WAS SORRY IMPLYING HE
STILL HAD NOT HEAR OF IT
-v-
WASHN - INS- PRESIDENT ROOSEVELT
TODAY FLATLY DENIED A REPORT THAT LEND-LEASE
GOODSX TO BRITAIN WILL BE MADE AVAILABLE FOR
BRITISH RE-EXPORT
AT SAME TIME OFFICIALS OF FOREIGN
ECONOMIC ADMINISTRATION ACKNOWLEDGED THAT A NEW
LEND-LEASE AGREEMENT IS BEING NEGOTIATED WITH
GREAT BRITAI TO COVER THE PERIOD OF THE
PACIFIC WAR AFTER THE COLLAPSEOF GERMANY AND
THAT RESTRICTIONS WILL BE RELAXED ON BRITISH
EXPORTATION OF GOODS ACQUIRED FROM
UNITED STATES BY DIRECT PURCHASE
MEANTIME IT WAS LEARNED THAT A SWEEPING
PLAN BY WHICH ECONOMY OF GREAT BRITAIN
WILL BE SUPPORTED BY FINANCIAL AND ECONOMIC
ASSISTANCE FROM THE UNITED STATES DURING
-PHASE TWO- OF THE WAR HAS BEEN DISCUSSED AND
GENERAL PRINCIPLES AGREED UP ON IN WASHINGTON
CONFERENCES BETWEEN BRITISH AND AMERICAN EXP-
ERTS IT WAS LEARNED TODAY
Regraded Unclassified
THE PLAN INCLUDES A PROPOSAL
TO CONTROL RECONVERSION IN BOTH COUNTRIESX so
THAT BRITAIN WOULD NOT BE -OUTDI ST ANCED- BY
THE UNITED STATES IN PRODUCTION BETWEEN THE TIME
OF GERMANY-S FALL AND DEFEAT OF JAPAN
THE CONFERENCES HAVE FOLLOWED A PATTERN
LAID DOWN IN A DIRECTIVE PREPARED AT QUEBEC BY
PRESIDENT ROOSEVELT AND BRITISH PRIME
MINISTER CHURCHILL - THE GENERAL PURPOSE OF THE
PLAN IS TO KEEP BRITISH ECONOMY -IN ST EP - WITH
AMERICAN ECONOMY DURING THE PERIOD BETWEEN
THE END OF THE EUROPEAN WAR AND THE END OF THE
WAR WITH JAPAN
THE LEADING BRITISH NEGOTIATOR IS LORD KEYNES
ECONOMIC ADVISER TO THE BRITISH TREASURY
WHO CAME TO WASHINGTON FROM LONDON DIRECTLY
AFTER THE QUEBEC CONFERENCE
AS THE KEYNES CONVERSATIONS DR AW TO A CLOSE
A STATEMENT IS ABOUT TO BE ISSUED BY THE TWO
GOVERNMENTS WHICH WILL COVER THE FOLLOWING
MAJOR POINTS OF AMERICAN AID TO BRITAIN
- LEND LEAVE WILL BE CONTINUED THROUGH
-PHASE TWO- OF THE WAR- IT IS UNDERSTOOD THE
BRITISH REQUEST FOR LEND-LEASE IN THIS PERIOD
AMOUNTED TO 6 500 000 000 DLS
2- RELAXATION OF EXPORT CONTROLS WHICH
HAVE PREVENTED BRITAIN FROM RE-EXP ORTING LEND-
LEASE GOODS - THE ORIGINAL RESTRICTION AS SET
FORTH IN A BRITISH WHITE PAPER TWO YEARS AGO
REQUIRED THAT UNITED STATES OFFICIALS SHOULD
PASS ON ALL BRITISH REQUESTS FOR EXPORTS
so LONG AS BRITAIN WAS ACQUIRING GOODS UNDER
LEAND-LEASE
THIS WOULD NOW BE MODIFIED TO PERMIT BRITAIN
TO RE-ENTER THE EXPORT FIELD BUT WHETHER SHE
WILL BE PERMITTED TO RE-EXPORT LEND-LEASE GOODS
OR ONLY GOODS BOUGHT FOR CASH HAS NOT BEEN
DETERMINED - ONE AMERICAN OFFICIAL TOLD INTER-
NATIONAL NEWS SERVICE THAT RE-EXPORT
OF LEND-LEASE GOODS -WILL BE PERMITTED
ONI Y OVER MY DEAD BODY-
Regraded Unclassifie
3- COORDINATION OF RECONVERSION - THE
OBJERTIVE IS TO HOLD BACK RECONVERSION OF WAR
INDUSTRIES IN UNITED STATES TO A DEGREE
WHICH WOULD BE -FAIR- TO GREAT BRITAIN AND
TO PREVENT UNITED STATES FROM GETTING OFF TO
A HEAD START IN CAPTURING POST WAR EXPORT
MARKETS
AT FIRST AN ATTEMPT WAS MADE TO REGULATE
THE RECONVERSION OF THE TWO COUN-
TRIES IN GREAT DETAIL so THAT MANUFACTURERS OF
A GIVEN LINE OF GOODS IN UNITED STATES
WOULD KEEP IN STEP WITH THE SAME TYPE OF
MANUFACTURERS IN GREAT BRITAIN
THIS WAS ABANDONED HOWEVER AS BEING TWO
COMPLICATED AND AN -OVERALL- PLAN WAS SUBSTI-
TUTED WHEREBY THE TWO COUNTRIES WILL BE KEPT
TO THE SAME PERCENTAGE OF RECONVERSION AT A
FIXED DATE - NAMELY SIX MONTHS AFTER THE
COLLAPSE OF GERMANY
IT IS UNDERSTOOD THAT THE FIGURE OF 40 PC
HAS BEEN DISCUSSED - THAT IS BOTH COUNTRIES
WOULD AGREE TO RECONVERT BY NO MORE THAN
40 PC OF NORMAL PEACE TIME CAPACITY AT THAT
DATE
WITHOUT SUCH AN AGREEMENT BRITISH EXPERTS
HAVE ARGUED THAT THEIR INDUSTRY WOULD BE OUT -
DISTANCED IN -PHASE TWO- OF THE WAR WHEN ALL
BRITISH PRODUCTION WOULD HAVE TO BE WAR
PRODUCTION BUT A LARGE PART OF AMERICAN PRODUC-
TION COULD BE CONVERTED TO CIVILIAN GOODS
ON OTHER HAND IF BRITAIN CONTINUES
TO RECEIVE LEND-LEASE GOODS AND IS PREVENTED
A DEGREE OF RECONVERSION A -FAIR- BALANCE COULD
BE ACHIEVED - AN AMERICAN OFFICIAL EXPRESSED
IT THIS WAY
-WE DON-T EXPECT BRITAIN TO MAINTAIN A
100 PC WAR FOOTING TO QUALIFY FOR LEND-
LEASE-
-V-
101
BRITISH-AMERICAN LEND-LEASE DISCUSSIONS
NOV
3
WASHN - DJ - TOP OFFICIALS IN FOREIGN
2:45
ECONOMIC ADMINISTRATIONS SAY THAT IT IS NOW
ESTIMATED BRITISH LEND-LEASE REQUIREMENTS
FOR 1945 WILL REACH 6 500 000 000 DLS
DISCUSSIONS CURRENTLY BEING CARRIED ON
BETWEEN STATE DEPT AND F E A OFFICIALS FOR THE
U S AND LORD KEYNES AND A STAFF OF EXPERTS
FROM GREAT BRITAIN CENTER AROUND THIS FIGURE
ALTHOUGH AS THE WAR PROGRESSES IT MAY BE
SUBSTANTIALLY REDUCED
NONE OF THE ITEMS COVERED BY THE ESTIMATE
FOR LEND-LEASE INCLUDE NON-MILITARY PRODUCTS
WHICH BRITISH COULD RE-EXPORT IN REBUILDING HER
WORLD TRADE
SAID ONE OFFICIAL- -THE BRITISH HAVE NEVER
ASKED FOR THE RIGHT TO RE-EXPORT LEND-LEASE
SHIPMENTS IN BUILDING UP COMMERCIAL TRADE AND
THE U S WOULD NOT ACCEPT SUCH A PROPOSAL IF
IT WERE MADE-
THE ESTIMATED 1945 LEND-LEASE REQUIREMENTS
OF BRITAIN GREW OUT OF THE ROOSEVELT-CHURCHILL
QUEBEC CONFERENCE OFFICIALS SAID - HOWEVER
AT THOSE SESSIONS NO FIGURE WAS ACTUALLY ARRIV-
ED AT - THE CONFERENCE ARRIVED AT -STRATEGIC
DECISIONS- FOR THE UTILIZATION OF LEND-LEASE
GOODS AND THE FACILITIES AND PRODUCTS OF BOTH
BRITAIN AND U S THROUGH POOLING FOR THE SPEEDI-
EST POSSIBLE VICTORY
DETERMINATIONS ARRIVED AT IN QUEBEC WERE
TURNED OVER TO STAFF CHIEFS OF ARMY NAVY
AND AVIATION OF BRITAIN AND THEIR COUNTERPARTS
IN THIS COUNTRY FOR PURPOSE OF CONVERTING THEM
INTO ACTUAL MUNITION ITEMS AND RAW MATERIAL
AND FACILITIES FOR USE IN MILITARY PRODUCTS -
FOOD ALSO WAS INCLUDED ON THE LIST
DECISIONS OF THE STAFF CHIEFS WERE THEN RELAY
-ED TO THE COMBINED RAW MATERIAL AND COMBINED
WAR PRODUCTIONS BOARDS COMPOSED OF REPRESENTA-
TIVES OF THE TWO COUNTRIES FOR PURPOSE OF
PREPARING SCHEDULES FOR THE FUTURE OUTPUT AND
UTILIZATION OF POOLED AMERICAN AND BRITISH
PRODUCTS OF WAR
Regraded Unclassified
152
NOV 3 1944
LORD KEYNES AND MEMBERS OF THIS MISSION
HAVE BEEN IN THIS COUNTRY FOR WEEKS OFFICIALS
SAID WORKING ON CURRENT AND FUTURE LEND-LEASE
AND CASH REQUIREMENTS OF THE BRITISH
AS PRODUCTS NOW BEING SHIPPED UNDER
LEND-LEASE NO LONGER ARE NEEDED FOR WAR THEY
ARE TRANSFERRED TO A CASH PROGRAM WHICH LORD
KEYNES IS ALSO NEGOTIATING ON WITH F E A AND
STATE DEPARTMENT OFFICIALS - AN EXAMPLE IS THE
REMOVAL OF MACHINE TOOLS FROM THE LEND-LEASE
SHIPMENTS TO BRITISH NEARLY 12 MONTHS AGO -
IT WAS FOUND THAT THEIR NEED FOR WAR
PRODUCTION WAS LESS AND FOR CIVILIAN PRODUCTION
GREATER AND THAT THEREFORE THEY WERE NO LONGER
ELIGIBLE UNDER LEND-LEASE
THE UNITED KINGDOM AND UNITED STATES LEND-
LEASE AND TRADE CONFERENCES ARE SEEKING TO
DEVELOP HOW AND WHEN PRODUCTS NOW GOING TO
BRITAIN FOR WAR PRODUCTION -RAW MATERIALS AS
WELL AS MILITARY PRODUCTS- CAN BE CUT DOWN
AND IN THEIR PLACE SUBSTITUTED CASH ITEMS WHICH
BRITISH WILL BE FREE TO RE-EXPORT OR USE IN
GREAT BRITAIN FOR REBUILDING HER HOME ECONOMY
LIMITING FACTORS IN MEETING REQUESTS OF
BRITAIN FOR AMERICAN PRODUCTS TO BE BOUGHT FOR
CASH AND USED FOR RE-EXPORT IN BUILDING
COMMERCIAL BRITISH TRADE ARE THE SAME AS THOSE
WHICH HAVE BEEN BOTTLENECKS IN WAR PRODUCTION
AND DISTRIBUTION OF WAR PRODUCTS TO THE
VARIOUS THEATRES OF WAR - THEY ARE- RAW
MATERIALS FACILITIES MANPOWER AND SHIPPING
SPACE
Regraded Unclassified
THE AMERICAN-BRITISH CONFERENCES NOW GOING
ON WITH RESPECT TO FUTURE SHIPMENTS TO BRI-
TAIN UNDER LEND-LEASE AND FOR CASH ARE
ATTEMPTING TO PROJECT INTO THE FUTURE WHAT CAN
BE MADE AVAILABLE TO THE BRITISH FOR CASH -
BUT OFFICIALS SAY IT WOULD BE PERFECTLY
SILLY TO ATTEMPT TO BE SPECIFIC AB OUT GOODS TO
BE AVAILABLE FOR NON-MILITARY PURPOSES
WHEN THERE ARE SO MANY LIMITING FACTORS - IF
RAW MATERIAL WERE AVAILABLE FOR CASH IT WOULD
STILL HAVE TO BE CLEARED BY THE COMBINED
RAW MATERIAL BOARD AND THEN SHIPPING SPACE
NOW USED FOR LEND-LEASE WOULD HAVE TO BE
MADE AVAILABLE
THE F E A HAS FUNDS TO SHIP THE
6 500 000 000 DLS OF LEND-LEASE ITEMS TO BRITAIN
SINCE ONLY THE NON-MILITARY ITEMS COME OUT OF
ITS 5 000 000 000 DLR APPROPRIATION - DIRECT
MILITARY ITEMS - - MUNITIONS GUNS ETC - -
ARE TAKEN OUT OF MILITARY AND NAVAL
APPROPRIATIONS RATHER THAN F E A FUNDS
-v-
EXECUTIVE OFFICE OF THE PRESIDENT
WAR REFUGEE BOARD
INTER-OFFICE COMMUNICATION
DATE November 3, 1944
TO
Secretary Morgenthau
FROM
J. W. Pehle
The following is the story on the Eisenhower
statement:
On September 28, 1944, I sent a letter to McCloy
transmitting the suggestion that General Eisenhower
issue a statement warning the Germans against the
extermination of persons held in forced-labor battalions
and in concentration camps. We had been getting many
requests for additional statements by the President and
by military authorities and it was felt here that it
made more sense for Eisenhower to issue a statement which
would not be interpreted as a political gesture. Also
we felt that such an action might have some effect since
Eisenhower presumably will be in charge of certain parts
of Germany when occupied. A copy of the statement trans-
mitted to McCloy is attached, marked Exhibit A.
Simultaneously, this statement was cleared in
principle with the State Department which suggested
certain language changes.
On or about October 9, Judge Rosenman called me
concerning a request that Proskauer had made that the
President issue a statement. I told Rosenman about the
proposed Eisenhower statement and he was fully in agree-
ment that it would be preferable for General Eisenhower
to issue a statement rather than the President. He
asked if he could be of any help in pushing the statement
with the military authorities and I sent to him a
suggested memorandum from the President to Secretary
Stimson approving the statement. The President signed
the memorandum to Secretary Stimson on October 18. A
copy of the President's memorandum is attached, marked
Exhibit B.
Regraded Unclassified
200
- 2 -
In the meantime, the War Department transmitted the
text of the proposed statement to General Eisenhower for
his views. Eisenhower said that he had no objections to
issuing the statement provided a change was made in the
language to change the words "Without regard to their
nationality and whether they are Jewish or otherwise" to
read "without regard to their nationality or religious
faith". The War Department submitted the matter to the
British authorities who also suggested an unimportant
language change which was made.
Upon receipt of Eisenhower's comments the War Department
replied to the President's memorandum on October 20,
furnishing him with a copy of the statement in its latest
form and telling him that the matter was pending with the
Combined Chiefs of Staff. Apparently the President,
instead of filing the revised statement or writing on it
"Approved, F.D.R.", signed the statement and returned it to
the War Department. The War Department was somewhat
mystified by the President's signature on the statement
and asked me to clear up the matter. Judge Rosenman's
secretary checked into the facts and told me to advise the
War Department that the President had merely meant to
approve of Eisenhower issuing the statement.
It is expected that General Eisenhower will issue a
statement along these lines in the near future. The latest
version of the statement is attached as Exhibit 0.
At the same time, we are working through the State
Department to try to get Russian military or civil authorities
to issue a comparable statement, which would be very signifi-
cant since the Russians, to our knowledge, have never taken
any such action.
I have searched my recollection further as to whether
I mentioned this matter to you. I know that I intended to
do so and thought that I had. However, since you do not
recall it I assume that you are correct and you were not kept
up to date on the matter. Certainly you should have been.
Attachments
Regraded Unclassified
EXHIBIT "A"
105
GERMANS!
There are within your midst large numbers of
persons in forced-labor battalions and in concentration
camps. A great many citizens of the United Nations,
including Poles and Czechoslovaks are among these
captives. There are also among them many persons
who have been declared by Hitler to be stateless.
Without regard to their nationality and whether they
are Jewish or otherwise, Germans, these are my orders:
You shall disregard any order from whatever source,
to molest, or otherwise harm or persecute any of
these people. As the Allied armies, already firmly
on German soil, advance, I shall expect to find these
persons alive and unharmed. Severe penalties will be
inflicted upon anyone who is responsible, directly or
indirectly, in large measure or in small, for their
mistreatment. Those now exercising authority, take heed!
(Text of proposed statement by General
Eisenhower as transmitted to McCloy on
September 28.)
Regraded Unclassified
106
"EXHIBIT B"
October 18, 1944
MEMORANDUM TO SECRETARY STIMSON
There is attached a proposed statement
to be issued by General Eisenhower with respect
to prisoners in enemy concentration and forced
labor camps which the War Refugee Board has
submitted for consideration.
In view of the seriousness of the
situation, I think General Eisenhower should
issue such a statement as promptly as possible.
FDR
Regraded Unclassified
107
GERMANS
There are within your midst large numbers of
persons in forced-labor battalions and in concentration
camps. Without regard to their nationality and whether
they are Jewish or otherwise, Germans, these are my
orders: You shall disregard any order from whatever
source, to molest, or otherwise harm or persecute any
of these people. As the Allied armies, already firmly
on German soil, advance, we shall expect to find these
persons alive and unharmed. Severe penalties will be
inflicted upon anyone who is responsible, directly or
indirectly, in large measure or in small, for their
mistreatment. Those now exercising authority, take
heed!
Regraded Unclassified
108
EXHIBIT "C"
GERMANS!
There are within your midst large numbers of
persons in forced-labor battalions and in concentration
camps. Without regard to their nationality or
religious faith, Germans, disregard any order from
whatever source, to molest, or otherwise harm or
persecute any of these people. As the Allied armies,
already firmly on German soil, advance, we shall
expect to find these persons alive and unharmed.
Severe penalties will be inflicted upon anyone who
is responsible, directly or indirectly, in large
measure or in small, for their mistreatment. Those
now exercising authority, take heed!
(Latest version of the Eisenhower statement - Nov. 3, 1944)
Regraded Unclassified
108
NOV 3 1944
Dear General Eisenhower:
When I saw you last summer you asked ne if the
Treasury could make up a book of specimens of the various
currencies and stamps which had been made for use by the
Allied Armies in the several European countries. I now
have those books as follows:
1. Specimens of Allied Military Lira and Postage
Stamps
2. Specimens of Supplemental French Franc Currency
and Postage Stamps
3. Specimens of Committee French Franc Currency
and Postage Stamps
4. Specimens of Allied Military Mark Currency and
Postage Stamps
These are rather heavy to ship to you in Europe and
I have given instructions for them to be held in safekeeping
here in the Treasury until your return or receipt of further
instructions.
With kind personal regards, I an
Cordially yours,
(Red) H mgh.
(Signed) H. Morgenthau, Jr.
General Dwight D. Eisenhower
Supreme Headquarters
Allied Expeditionary Forces
Regraded Unclassified
110-
NOV 3 1944
Dear General Holmes:
When I was in Europe last SUMMIT you and General
Bisenhower asked no for books of specimens of the vari-
ous currencies and stamps which had been made for use
by the Allied Armies in the several European countries.
I now have those books as follows:
1. Specimens of Allied Military Lira and Postage
Stamps
2. Specimens of Supplemental French Frane Currency
and Postage Stamps
3. Specimens of Committee French Franc Currency
and Postage Stamps
4. Specimens of Allied Military Mark Currency and
Postage Stamps
These are rather heavy to ship to you in Europe and
I have given instructions for them to be held in safekeeping
here in the Treasury until your return or receipt of further
instructions.
A letter to General Eisenhower advising that similar
books have been prepared for him has gone forward.
With kind personal regards, I am
Cordially yours,
(Signed) H. Morgenthau, Ja.
General Julius I. Holmes
Supreme Headquarters
Allied Expeditionary Forces
DWB:ew
Regraded Unclassified
111
November 3, 1944
My dear Jack:
1 am returning to you herewith copy #338
of "Germany and Austria in the Post-Surrender
Period". Thank you very much for letting me
study this document.
Yours sincerely,
(Signed) Henry
honorable John J. McCloy,
Assistant Secretary of war,
War Department,
Washington, D. C.
P.S. Enclosed herewith find copy of my letter
to Stettinius.
Regraded Unclassified
TOP SECRET
112
STATE STATES OF
THE ASSISTANT SECRETARY OF WAR
WASHINGTON
STATE
OFFICE
20 October 1944
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington 25, D. C.
Dear Mr. Secretary:
I enclose some policy directives prepared by the
British for submission to the EAC covering Germany and
Austria in the Post-Surrender Period.
As we are short of these copies, I wonder if you
could return this to me after you have had a chance to
go over it. We are working on it now and will have our
suggestions in due course but as our work is not com-
pleted on them I cannot give them to you now.
Sincerely,
Jungely
Inc.
TOP SECRET
Regraded Unclassified
113
November 3, 1944
Dear Ed:
I am sending you herewith Memorandum on
the British Draft of Policy Directive for
Germany.
This was shown to the War Department, and
with their approval I gave a copy of it to Lord
Cherwell just before he left.
Sincerely yours,
(Signed) Henry
The Honorable Edward B. Stettinius, Jr.,
Under Secretary of State,
Washington, D.C.
Regraded Unclassified
114
1
November 3, 1944.
Dear Mr. Wels:
I appreciate greatly your kindness in sending
me a copy of a letter to you from & New York lawyer
now serving in France as a lieutenant.
Naturally I was much interested in what he
said about the "Morgenthau plan" as well as in
other judgments of the men at the front.
The opinions of thoughtful soldiers on matters
such as your correspondent discusses certainly are
worth heeding.
Sincerely,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Mr. Isidor Wels
551 Fifth Avenue
New York 17, New York
HEG/mah
Mr
Regraded Unclassified
LAW OFFICES
Moss & WELS
FRANK MOSS
ISIDOR WELS
551 Fifth Avenue
RICHARD H. WELS
New York (17) November 1,1944
Hon. Henry Morgenthau,
Secretary of the Treasury,
Washington, D. C.
My dear Mr. Secretary:
Yesterday I received a letter from a New
York attorney whom I know very well.
I have a high
regard for his judgment.
He has been overseas for
a couple of years and is now serving as a lieutenant
in France.
I send this to you because of the ref-
erence to your plan.
Sincerely,
Regraded
Unclassifie
116
Mrs TOP Kew5
Resenstry will find This
officer's leten
quite inthating
pres
FROM: MR. GASTON
1.7
EXTRACTS FROM A LETTER RECEIVED FROM A NEW YORK
LAWYER, NOW IN FRANCE.
THE LETTER IS DATED
OCTOBER 8th, 1944.
The whole idea of going home has raised a helluva hullabaloo
over here because of the Army's recent publication of its plan for
partial demobilization after the defeat of Germany. The joker
is that publicity accompanying the plan said that we were consult-
ed, and the plan was the net result of our suggestions. Yet nobody
has found anybody who was consulted, nor for that matter anybody who
is satisfied with it. Preferences and priorities are given to the
men with children, which means that those who quickly married and had
pregnant wives the day after in a vain effort to avoid the draft are
now given the stamp of approval by the army.
Penalized are the
more conservative single men who decided to wait until this mess
was over and they knew their economic ability before taking on fam-
ily obligations. Also, no distinction is made between ages,
30 it doesn't make any difference whether you are 21 or 41.
If the men over here were consulted, they have the best plan
of all, but no Congressman would have guts enough to suggest it.
They think that the major job of policing of Germany should be done
by European countries with most at stake. Of course, we should
be represented with a cadre made up of regular army men plus those
selectees who want to stay. Then there should be compulsory mil-
itary training for one year, with four months spent in basic train-
ing in the states and at least six months on occupational duty in
Germany.
The kids thus on duty would lose nothing socially or
economically; in fact, they would be broadened by the experience.
Our country would have an army, and middle aged single men would be
able to go home, marry and have families and there would be no gap
in the next generation.
But you find a Congressman who would
suggest such legislation. Compulsory military training costs
votes, and nobody wants to lose votes.
Yet there is no doubt
that it is the best plan to cause the least discomfort to the least
number of people, and anybody in the states who will even start a
whisper about it will be B. permanent hero over here.
Everybody over here is pretty angry about the treatment ac-
corded German PWs. True, we should obey the Geneva conference
rules, because we have our own boys who are prisoners to think about.
But there is no sense to this bending over backwards about it. Why
should they get new tents to sleep in, cigarettes to smoke, and oran-
ges to eat in the very face of Frenchmen who haven't had an orange
in five years, and who when they were PWs in Germany were rewarded
with a clout over the backs 1f they even ventured a thought about a
cigarette.
The handwriting on the wall is now clear. We are afraid
that the softies back in the states, who fight their wars from cock-
tail bars and Park Avenue sofas have the ears of the powers that
be.
Soon will come the day when the American public will feel
Regraded Unclassified
178
-2-
that the Germans are really a peace loving, sauerkraut eating, beer
drinkingpeople, who were misled by a handful of nasty men. Individ-
ual German citizens will claim that they were really pro-Ally all
the time, that they were never Nazis, and that they only joined
the party out of economic necessity. And the stupid Americans
will believe them, and ship tons of clothing and food stuffs, while
the recipients will laugh heartily at us behind our backs for being
the fools that we are.
We now hear talk about reconstruction of German industry
to pay reparations. Our attitude is: To hell with the repa-
rations. Every country in the world is presently making a suck-
er out of America, and we might as well play sucker to the extent
of & few more billions, and follow the Morgenthau plan to make
Germany strictly an agricultural country.
Let her industrialize,
and we will be back here fighting in another 20 years. The diffi-
culty is that a lot of people are talking and planning about things
they know nothing about. Maybe if they were here and understood
the news behind the news it would help change their minds. Maybe
they don't realize behind the news that when & certain city is
taken there is a story of blood, terror, horror, death, and wounds
worse than death.
If they saw a little of that, they wouldn't be
quite so soft.
Regraded Unclassified
119
TO: Mrs KW5
nite That This
letter asks The
publicher f the
Cincinnati Enginer
to dur in same time,
1k is Whely to a ccept
Device his foos is the
american trist department Security Friest
Co.,Jun across The street WES
FROM: MR. GASTON
120
November 3, 1944.
Dear Mr. Ferger:
I thank you for your courtesy in writing to
me in reply to my letter erroneously addressed to
your predecessor, Mr. Wiley.
My appreciation of the Enquirer's editorial
is increased by the knowledge that you as publisher
directed its preparation.
I hope you will find it convenient to call on
me on one of your visits to Washington.
Sincerely,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Mr. Roger H. Ferger
Publisher, The Enquirer
Cincinnati 1, Ohio
HEG/mah
a
Regraded Unclassified
The Cinrinnati Enquirer
One of the World's Greatest Newspapers
OFFICE OF
THE PUBLISHER
Dear Mr. Morgenthau:
Your letter of October 19th, addressed to W. F.
Wiley, our late Publisher, who died on August
24th, was referred to me upon my return to Cin-
cinnati this morning. I succeeded Mr. Wiley as
Publisher of the Enquirer.
I am glad you approve our editorial treatment of
the highly controversial question - "Conversion
of Germany."
So frequently in questions of this kind there is
so much more heat than light that people are in-
clined to let their emotions run away with their
judgment. We followed this question very care-
fully and felt that you made a sane contribution
in the matter and that Major George Fielding Eliot
added to the weight of your cause. That was the
reason I had prepared the editorial which you men-
tioned.
Your letter we will regard only as a personal ex-
pression and will not publish it. I want you to
know, however, your interest is appreciated.
Roger Sincerely H. Ferger yours
The Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D.C.
October 31, 1944
Regraded Unclassified
COPY
122
November 3, 1944
Mr. Erwin D. Canham
Editor, The Christian Science Monitor
Boston, Massachusetts
Dear Mr. Canham:
A paragraph in the editorial in which you "come out"
for Dewey disturbs the admiration I have always had for the
Christian Science Monitor and moves me to write to you per-
sonally. The paragraph reads: "No one knows how much of the
new stiffening of German resistance is due to the amazing
episode in which Mr. Roosevelt allowed Secretary Morgenthau
to by-pass the State and War Departments and bring out a
plan for German industry with which Herr Goebbels was able to
frighten all Germans."
There are several features of this that seem to me to
depart a long way from Monitor standards of accuracy and in-
telligence:
(1) "allowed Mr. Morgenthau *** to bring out a plan****,"
Mr. Morgenthau didn't bring out anything. Flynn of the Wall
Street Journal and Hightower of the Associated Press printed
stories purporting to summarize confidential recommendations
made by Secretary Morgenthau to the President. They were
characterized by Joe Harsch in a story in the Monitor as "leaks"
and Secretary Morgenthau does not know their source to this day;
nor do I. His investigations have convinced him that they didn't
come from the Treasury.
(2) "*** to by-pass the State and War Departments." The
newspapers have reported that the President appointed a Cabinet
Committee to consider the question of the treatment to be accorded
Germany after the war, the members chosen by him being the Sec-
retary of State, the Secretary of the Treasury and the Secretary
of War. If as a result separate memoranda by each one of the
three members of the Committee were submitted to the President
is there any record on which the charge that anybody was "by-
passed" can be fairly based? I wonder if the thought here can
be that the terms of peace to be imposed on Germany, which will
affect the whole future of the world for generations, are the
sole business of any one or two members of the Cabinet - that
Regraded Unclassified
153
- 2 -
they are purely of military or diplomatic concern - and that
the President has no right to consult others. That would seem
to me a strange concept indeed.
(3) "No one knows how much of the new stiffening of German
resistance is due" etc. I think in fact that no one has any
military basis or authority for believing that there has been any
new stiffening of German resistance based on this episode or any
other propaganda consideration. Did the going become tougher on
the Italian front? On the eastern front? There is no evidence
of it. What we do know is that after the hard shell of German
resistance in Normandy was broken the Germans scurried back be-
hind the Westwall, naturally losing a good many men in the process,
and that, once behind their prepared defenses on German soil,
they have resumed a vigorous resistance. Did any sane person
expect anything different? Certainly no military man with any
claim to competence did. Two pretty good Republican newspapers
have expressed themselves on this point. The Herald-Tribune on
October 1 said of Senator Johnson of Colorado that "his charge
that 'prior to the announcement of the Morgenthau plan the
Germans were surrendering in droves; now they are fighting like
demons' is simply nonsense." The Chicago News said on October 17:
"In conclusion we beg leave to disagree with those who think the
Germans in France surrendered because of the leaflets we dropped
on them, and are fighting harder now because of Mr. Morgenthau.
The Germans in France surrendered because they were utterly de-
feated in one of history's most brilliant campaigns. The Germans
now fighting us are not those who surrendered. These Germans
are fighting hard because they have been and are good soldiers.
When we beat them, they too will surrender." I won't labor the
contrast between these statements and the Monitor's paragraph,
which I can't help appraising as both partisan and irresponsible.
I haven't the slightest doubt that we could save the blood
and the lives of thousands of American boys if an early peace
with Germany was our main desire and we were willing to pay the
price. We could do that simply by assuring the Germans that
we would take no territory from them and would allow them and
even help them to reconstitute their economy and go on with our
blessing and forgiveness as they were before the war. Hitler
and Goebbels have said practically this. And they trust us; they
would take our word even if we wouldn't take theirs. Why don't we
do that and isn't the idea that we ought to do just that implicit
in the Monitor's editorial? Or have we an objective in this war
which forbids such a course? The notion that at this stage of the
war we ought to avoid making the Germans angry seems to me both
ludicrous and tragic. It is tragic because it seems to reflect
Regraded Unclassified
- 3 -
the idea that we have no aims in this war and that all the blood
and suffering are pointless and without good cause or reason.
If I took the view that German resistance had been stiffened
at the needless cost of American lives through the publication
of stories about the "Morgenthau plan", I would not hold the
American press guiltless. This was not a story given out by or
with authority. Its source was nameless and it was printed on
the authority of the press associations and newspapers that cir-
culated it. We have, I believe, a voluntary censorship under
which reputable American newspapers agree not to print matter
that is harmful to the public interest and likely to interfere
with the conduct of the war. If the newspapers which gave currency
to this story now say that it was harmful, that it stiffened
German resistance, and even that it cost "thousands of American
lives", do they not convict themselves of an act that it will be
hard for them to defend before their own consciences?
I don't accuse them of prolonging the war or needlessly
sacrificing American lives; but I think they can be accused of
it with far more reason and justification than can the Secretary
of the Treasury.
This may seem to you many words on a small text. I wouldn't
write them if 1 didn't have high respect for you and for the
Monitor. But in this I think you were gravely wrong.
Sincerely,
(Signed) Herbert E. Gaston
Assistant Secretary of the Treasury
Regraded Unclassified
125
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
November 3, 1944
TO THE SECRETARY:
Mr. Bowles of the OPA has asked Mr. Bartelt
to ascertain if you would be good enough to
make a talk to the OPA Sixth War Loan Rally
to be held around November tenth or some day
thereafter at your convenience. I am told they
have about 3900 employees.
Mr. Bowles would be very glad if you could
do it, and he would introduce you.
DWB
yes do this
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
126
NOV 3 1944
Dear Mr. Helm:
I wish to thank you for your letter
of October 7th in which you gave me some
very interesting information concerning
the reception of the new War Bond redemp-
tion procedure in your area. It is very
helpful for me to know how any new move in
the War Bond program is received throughout
the country for this program has been the
people's program from the start and anything
bearing on it is of great concern to me.
It is reassuring to know that public
reaction to the new procedure has been good,
and I shall relay your message to members
of my staff here to whom it will be of in-
terest and value.
Sincerely,
(Signed) H. Morgenthau, Jr.
Mr. Grover C. Helm,
President,
The National Bank of Bloomington,
Bloomington, Illinois.
RWC:deb
Regraded Unclassified
127
(DIGEST FROM SECRETARY'S MAIL REPORT)
Grover C. Helm, President, The National Bank of Bloomington,
Bloomington, Illinois. Knowing how vitally interested you
are in the new program of allowing banks to cash Series E Bonds over-the-
counter, I thought that you would be pleased to view the record
of one country bank, such as our own. # On the first day
189 of the 279 bends redeemed had been issued by Credit Unions and
factories. We have talked to several bankers, and the majority of them
informed the writer that the notice having gone out that October 2nd
would be the first day, naturally many people who would have sent
their bonds in during the last two or three weeks waited until the
opening day, which, of course, made a lot of activity in their banks,
but most of them thought it would gradually dry up. The reaction
of the public is wonderful. They appreciate the fact that they
do not have to pay either 25# or 50$ and we have been told in some
instances they have had to pay $1.00 for certification of their
bonds. You are to be congratulated for the inauguration of this
new policy. (Referred to Mr. D. W. Bell)
Regraded Unclassified
178
MEMORANDUM FOR THE SECRETARY.
November 3, 1944.
Mail Report
With a sharp decline in correspondence about
the Sixth Drive, our mail returned this week to more
normal proportions.
Although it is too early to determine the volume
to which it may rise, general bond correspondence
indicates the development of several sore spots. In
the last six days there have been indications of
trouble in the delivery of bonds purchased by service
personnel of the War Department. The increase in such
complaints brought in 15 or more letters from relatives
of service men reporting that September bonds, and
occasionally July and August bonds, have not yet been
received. Most of these writers explained that in the
past, bonds always reached them by the middle of the
month. The other sign of possible serious future
trouble is in connection with the red tape surrounding
the cashing of bonds and checks in the names of men
killed in action. Apparently Treasury and bank officials
are refusing the telegrams sent by the War and Navy
Departments as proof of death, and wives and parents
of men sie killed do not see how they can get the ordi-
nary Death Certificate and so receive the money that
they need. There have also been indications that this
dissatisfaction and distress is being reported to
Congressional representatives and that we will hear
from them in protest over the way these matters are
handled.
There were only 20 bonds submitted here for redemp-
tion, and there was no further opposition to the over-
the-counter plan for cashing them.
Regraded Unclassified
129
- 2 -
Memorandum for the Secretary.
November 3, 1944.
The tax mail is still light. We received 16
demands for overdue refunds, and a few letters call-
ing attention to pension trust funds which the writers
seem to believe are being established to evade taxes.
The plan for making Germany an agricultural
nation elicited 9 communications, and for the first
time there was more unfavorable than favorable comment.
Letters forwarded from the White House during
October totalled only 188, of which 140 were re-routed.
It is interesting that approximately 65% of this mail
concerned the nonreceipt of income tax refunds.
gettorbush
Regraded Unclassified
170
Favorable Comments on Postwar Plan
for Germany
Joe H. Green, New York, New York. I heartily support
your idea that Germany be shorn of all heavy industry
for at least 50 years so as to end once and for all
the beastly Teutonic menace to the world. Hoping you
will continue this very worthy fight, and with my
best wishes.
Capt. Benjamin Markoff, APO 511, c/o Postmaster, New
York, New York. STAND BY YOUR GUNS HENRY! I am sure
that you have been deluged with numerous letters
from all over the world regarding the practical stand
to make Germany an agricultural country. As an
officer of the U. S. Army, serving 15 months overseas,
and close to four years in the service, I am not in 8.
position to be active politically, nor will circum-
stances permit me to dedicate all my energies to
"educate" those who believe in B. strong Germany after
the
war
* I do not want my children, or even my
grandchildren, to have to fight our NAZI Germany again.
To prevent this recurrence, every machine that can
potentially produce weapons of war must be transferred
on a quota basis. # Since when is the economy of
Germany so important to the rebirth of French industry?
Or Dutch, Belgian, Danish, Norwegian, Polish, Czech,
Greek, Italian, or Russian, for that matter! Each of
these countries would benefit more advantageously from
intensification of their local resources. *
Charles Lahnstein, New York City, transmits copy of
the following letter he has written to Mr. Louis
Nizer of New York: "On Tuesday, October 24, 9:30
p.m., I listened to the American Forum of the Air --
'What to do with Germany'. In the South American
newspaper, Pueblo Argentino, in Montevideo, there
is a report that high Nazi officials have already
Regraded Unclassified
131
- 2 -
arrived in Buenos Aires to prepare refuge for the
Nazi gangsters. Among those are Colonel Walter
Osterkamp, former Commander of a Pursuit Squadron
in Werneuchen, Germany. Osterkamp arrived with an
Argentine passport made out in the name of Theodore
Schmidt. Mr. Theodore Schmidt got a job in a school
of aviation in Cordova in Argentina. # # At the
American Forum, Dr. George N. Shuster and Dr. John
Haynes Holmes have tried to use all their influence
to help those good, poor Germans. # # Let's
keep
in mind that the attitude of the German militarists
is that of professionals who have acquired high skill
in a difficult and dangerous game. Their business
is to wage war -- war to the knife. Their proficiency
was not quite enough to win the game in 1918, so they
employed the years of apparent peace in improving
their skill. If it turns out once more that it has
proved insufficient, the German militarists, the
Prussian junkers, and the German industrialists will
probably waste little time in repining. * # Once
more the German militarists will say to themselves:
'Well played, but lost!' Let's get ready for the
next rehearsal in 1960.
=
Isidor Wels, Law Office, Moss & Wels, New York City.
Yesterday I received a letter from a New York attorney
whom I know very well. I have a high regard for his
judgment. He has been overseas for a couple of years
and is now serving as a Lieutenant in France. I send
this If to you because of the reference to your plan.
Everybody over here is pretty angry about
the treatment accorded German Prisoners of War.
Why should they get new tents to sleep in, cigarettes
to smoke, and oranges to eat in the very face of
Frenchmen who haven't had an orange in five years,
and who, when they were Prisoners of War in Germany,
were rewarded with a clout over the backs if they
even ventured B. thought about 8. cigarette. We are
afraid that the softies back in the states, who fight
their wars from cocktail bars and Park Avenue sofas
Regraded Unclassified
102
- 3 -
have the ears of the powers that be. Soon will come
the day when the American public will feel that the
Germans are really a peace loving, sauerkraut eating,
beer drinking people, who were misled by a handful
of nasty men. Individual German citizens will claim
that they were really pro-ally all the time, that they
were never Nazis, and that they only joined the party
out of economic necessity.
*
*
We now hear talk
about reconstruction of German industry to pay repara-
tions. Our attitude is: To hell with the reparations.
Every country in the world is presently making a
sucker out of America, and we might as well play
sucker to the extent of a few more billions, and
follow the Morgenthau plan to make Germany strictly
an agricultural country. Let her industrialize, and
we will be back here fighting in another 20 years.
The difficulty is that a lot of people are talking
and planning about things they know nothing about.
Maybe if they were here and understood the news behind
news, it would help change their minds. Maybe they
don't realize behind the news that when a certain city
is taken, there is a story of blood, terror, horror,
death, and wounds worse than death. If they saw a
little of that, they wouldn't be quite so soft.
Regraded Unclassified
- 4 -
Unfavorable Comments on Postwar Plan
for Germany
R. F. Kelly, Willowbrook, California. I have a boy
who suffered hardships unknown to the cushion pushers
of Washington. He was with the first contingent of
Marines to land in the Solomons on August 7, 1942.
My boy spent twenty-six months overseas, and
when he finally came to the states for a furlough,
what happened? He came in to Roosevelt Base in
Wilmington, where he stayed for two days; he was
then sent to San Diego in a truck packed with Marines
to stand up for over one hundred miles. He was kept
in San Diego for several days before he received his
furlough papers. What did he see when he came home?
Several bus loads of prisoners of war brought to
Long Beach to an amusement park to enjoy themselves -
cushioned buses to ride in, if you please! It is the
above conditions that make American fathers and
mothers who love their boys, hate and despise men
like yourself and Harold Ickes, Ickes, the Jap-loving
skunk. You and your unconditional surrender. How
many mothers and fathers want to hold out for uncon-
ditional surrender? None. I hope that the Roosevelt
bureaucrats are so badly defeated in November that
they will hide their deceitful faces forever.
I would like to see you and some of your ilk in the
front lines and kept there until the war is over,
and it would be over soon. I am sending copies of
this letter to two good Republican Congressmen who
have our country's interest at heart, who do not joke
and laugh while our youth are spilling their blood,
like your Commander-in-Chief does. Dewey is a man
whose heart goes out to these grieving mothers and
fathers, and does not wish to burlesque during times
like these. So here is hoping that the War Mongers
are completely eliminated in November.
Regraded Unclassified
234
- 5 -
William Upshur, Orlando, Florida. The present
writer just finished reading Shirer's "Berlin Diary".
Although he rakes Hitler and his henchmen over the
coals good and plenty, he says over and over again
that the German people as a whole were entirely
apathetic at the beginning of this war; no enthusiasm,
no fireworks, no meetings, speeches, and shouting,
which shows that the people were against the war.
Only a comparatively small, but loud and energetic
minority, the Nazis, was for it. Much like with us,
85 to 95% were against our entering this conflict.
As Hoover says -- you can have peace or revenge, not
both. The idea of taking away from the German people
the Saar, the Ruhr, East Prussia, Silesia up to Oder,
would mean war, not peace, as Clemenceau cynically
said of the Versailles makeshift.
1st. Lt. R. L. Heitkamp, c/o Postmaster, New York City.
"From the Front". For God's sake, quit giving the
German people an incentive to fight! Unconditional
surrender is a hard enough bargain to strike without
such promises as your plan for Germany. I agree with
your plan, but why publicize it.
Germany still
has a lot of fight left and you people with your plans
for Germany -- demobilization, V-day, etc., do not
make it easier for us.
*
Bear with us a little
longer and it will all be over. Confidentially, we
do not give a damn what happens to Germany after we
defeat them on the battlefield, 50 long as we get back
home, but quick! See our point? Don't make Germany
a "tougher nut to crack".
Regraded Unclassified
125
- 6 -
General Comments
Solon G. Vlasto, President & Publisher, Atlantis Greek
Daily, New York City. In increasing numbers we receive
every day inquiries from our readers who anxiously
are asking us if they are able to send material and
financial aid to their distressed relatives in the
liberated areas of Greece. To all our efforts to get
a definite response to our inquiries, through the
various authorities in New York, the only answer we
have received so far is that they expect further orders
from the State and Treasury Departments. Could it be
possible, Mr. Morgenthau, that the sending of help to
Greece by Americans of Greek descent be expedited so
that the suffering there might be relieved more quickly
and the anxiety of our people here minimized? On be-
half of the Americans of Greek descent I express to you
my deep appreciation and sincere thanks for any mea-
sures to be taken by the Treasury Department as you
may see fit, with the assurance that you will have the
everlasting gratitude of the Americans of Greek descent
whose relatives in Greece are in dire need.
Walter G. Fuchs, M.D., Monticello, New York. In 1943
I filed a TFR-500 report in reference of my property
in Germany that had been confiscated at 8. time when
I was settled here as & physician. In the German
R. St. Bl. 1938 (Reichs Stener Blatt), page 575, I am
listed as expatriated and confiscated and I asked the
Treasury Department in Washington for to please send
me if possible a copy from this paper or a short state-
ment. I received an answer, but besides was a sen-
tence: "The reports on Form TFR-500 do not in any way
constitute a registry of claims". Now, what else do
they constitute? Why had we to file the TFR-500? For
me they mean a claim and I will never give up the
claim. If you can spare the time, I would appreciate
to hear what the Government of the United States has
in mind to do with the property of Americans in enemies'
countries.
Regraded Unclassified
1"5
- 7 -
Donald Coe, Bronx, New York. When I heard about
the K-9 Dogs being sold I wrote right away to the
Treasury Department and offered $10 for one. Last
night on the radio I heard a man say they might be
$1.00. Gee, I sure want one of these dogs. I know
lots about them because I had a poodle for 5 years.
I am 121 years old and know how to take good care
of dogs. My mother says its all right for me to
have one of the K-9 dogs but doesn't think I have
a chance. # # Please, Sir, give me a chance first
to applie for a dog. My Mother said the auction
would be during the day and I go to school so that
I wouldn't have a chance. If the treasury department
has already got my name on the list I hope I hear
from them 80 I can have the dog by Christmas or maybe
before. Thank you very much for selling such swell
dogs all traned to obey.
Congressman Lindley Beckworth (Texas). I wish to
quote a pertinent portion of a letter I have received
from Mr. Bryant Payne, East Texas Salt Water Disposal
Company, Tyler, Texas. * # I was under the impression
that this Congress was going to do everything within
their power to avoid the scandal and rotten disposal
of surplus materials from the last war. I can't
understand why it is necessary to have junk dealers
and that sort to be the first purchasers from the
Government when many outfits, such as ours and the
Farmers Coops, could bid on and receive the stuff
right out of the Service Commands. I know that con-
sideration has been given to this surplus material,
but why wait until all of it is disposed of under the
setup as outlined in the letter received from the
Eighth Service Command before the rest of the business
firms and the individuals in the United States have a
chance to bid on it? I think that every returned
soldier should, if he desires, have the right to buy
an airplane, a pair of shoes, or whatever he desires,
at the same prices that these so-called dealers have
a right to purchase at." # #
Regraded Unclassified
177
- 8 -
Gerald M. Fennell, St. Moritz, New York City. I call
your attention to the enclosed clipping, setting
forth that there is now one billion dollars of French
balance available in this country for you to apply
on that Republic's six billion dollar debt to the
United States, and which has been owing to this
country upwards of a quarter of a century -- and on
which, one of their leading generals told me while in
the occupied part of Germany during the last war, they
never expected to pay a sou. My experience is that
they never pay a nickel of their debts, and I have
had an office in Paris and have done business with
the French people commencing in the 80's. This is
an opportunity to at last collect some of the interest
that they have owed us without ever paying 8. penny on
account.
The following letter was addressed to the President
by Mrs. E. D. Cargill, President, South Gate Hospital-
ity House, South Gate, California, and referred by the
White House to the Treasury for handling: "In South
Gate, a city of about 43,000, we have a Hospitality
House for servicemen that is the pride of the entire
community and is supported entirely by volunteer con-
tributions. We provide lodging for about 3,000 boys
a month and serve them meals 24 hours a day -- all
absolutely free. # # # About three weeks ago an in-
vestigator from the Internal Revenue Office came in
and found us guilty of the hideous crime of coloring
the margarine. On October 17th we paid a fine of
$7.40 and we were told that we would be watched and
if we colored any more margarine we would be fined
$600. (they flatter us -- where would we get $600.?).
It is positively revolting to serve this stuff with-
out some color. We understand that there are other
patriotic, nonprofit organizations in this same pre-
dicament and wondered if you, in this national emer-
gency, couldn't do something to correct this unjust
and ridiculous situation.
188
- 9 -
Favorable Comments on Bonds
George E. Olmsted, Traverse City, Michigan. This
letter is merely to express an appreciation of your
brief and explicit letter of October 21 regarding
quotas for employees for the Sixth War Loan.
Previously we have received an excessive amount of
literature and even long telegrams regarding the
Drives. At least, as far as we are concerned, such
use of borrowed funds has a depressive effect on
management and employees alike. If the funds supplied
are now to be used to a larger extent to supply equip-
ment, rather than furnish publicity, we will all feel
better about investing in War Bonds.
Regraded Unclassified
179
- 10 -
Unfavorable Comments on Bonds
Edith Nourse Rogers, House of Representatives.
(Massachusetts) Relatives of men killed in action
in the service have told me of difficulty in cash-
ing War Bonds bought by the men or with their funds,
either direct or on the survivor plan. Banks now
refunding these purchases are asking for a death
certificate which is not furnished by the Army, Navy,
or Marine Corps, and are being referred to the Bureau
of Medicine or Surgery, etc., for statements. Cer-
tainly the official announcement or telegram of death
is considered sufficient for the services to give and
some provision should be made to expedite the payment
in such cases on the statement these survivors are
given. Even a statement secured from a coroner in
Texas on the death by accident in the Army flying
service had to be sent to Chicago -- a duplicate or
photostatic copy was not accepted. I believe that
with the number of such casualties, there should be
some system or plan by which expedited action is pos-
sible, as simple as possible, without the necessity
of writing for official statements, and banks so in-
structed. # *
Mrs. W. G. Doyle, New York City. Recently I complained
about the Mfg. Trust Co., refusing to cash a bond in
an emergency. The gentleman's name is Mr. Sears, who
said it is his bank's ruling not to cash one for any-
one that isn't a depositor. Today I verified his
statement by going there and asking for his name.
I asked for his name because a John L. Sullivan,
Assistant Secretary of the Treasury, added insult to
injury when he answered my complaint by saying, "I am
confident that the Mfg. Trust Co., which has a record
of whole-hearted cooperation in the Savings program,
did not reject your application because you are not a
depositor". I hold a few thousand dollars worth of
bonds, have been too patriotic to get that kind of a
line. My sons are also very active with the armed
forces, and Mr. Sullivan's quotation is a bit off for
8 man in his position.
Regraded Unclassified
140
- 11 -
Senator Burnet R. Maybank (South Carolina) transmits
the following letter he has received from Mr. C. P.
Mangum of Chesterfield, South Carolina: "I am writ-
ing about a small matter, about which I do not know
if anything can be done. Not knowing the regulations
of the Government regarding issuing duplicate checks,
I just thought I would write you how I have been
treated, and just let it go at that. I had to
cash in one of my small bonds ($25.00); no delay, and
I received the check for the bond on August the lst,
1944; endorsed it and sent it to Peoples Bank and
Trust Company, Pageland, South Carolina, for deposit.
About ten days after this, I made request for a
duplicate as the check was lost or destroyed in the
bank at Pageland. Several days elapsed and I received
a surety bond to be executed, and on its return to
the Charlotte Branch of the Federal Reserve Bank of
Richmond, Virginia, I received notice they had for-
warded it to the Treasury Department. I
waited
approximately two weeks, and wrote the bank in
Charlotte that it occurred to me the Treasury Depart-
ment had had ample time to approve or reject it. No
reply. After waiting some two weeks longer,
I wrote the Charlotte Branch of the Federal Reserve
that it appeared to me I had lost the surety bond as
well as the check, and for the protection of my bondsman
to please return the bond, and I would let it go at
that. No answer to this.
#
Sometime two weeks
after this last statement, I received the bond from
the Treasury Department, pointing out two places for
me and my bondsman to sign -- had it completed and
returned it to Washington, D. C. This was two weeks
ago last Friday, the 13th of October. No replies to
any of my inquiries. * * I may be wrong, but I think
I was due the courtesy of an answer to my request.
Just think, two and a half months have passed since
starting to get a duplicate check, and no encourage-
ment that I will ever get it. Excuse me, but I am
darn sore over the whole business."
Regraded Unclassified
141
- 12 -
Unfavorable Comments on Taxation
Mr. William Plummer, Eckhart Mines, Maryland. Again
I find it necessary to write you about my 1943 income
tax return money. This is the third time I have
written about my tax money. It is rather funny to
think everybody all around here has received theirs
and I have yet to hear from mine.
#
W. Erle White, President, White's Auto Stores,
Wichita Falls, Texas. This corporation established
an employees' profit-sharing trust for eligible em-
ployees in accordance with the 1943 Revenue Act. The
trust agreement provided that the corporation would
contribute to all trust members 15% of their annual
salary. This, in the opinion of our attorneys and
our accountants, complied fully with the Revenue Act
of 1942. Shortly after establishing the trust we
filed an application with the Treasury Department
for approval. About sixty days ago we were notified
by the Fort Worth office that many amendments would
have to be made to the trust agreement. All of these
amendments, we think, are wholesome and good for the
corporation and the trust members except one. This
is the rule which the Treasury Department has made
that provides that stockholder officers of the cor-
poration cannot have more than 30% of the trust contri-
bution. This has the effect of reducing our contribu-
tion 50%, or from 15% to 7½% each, as four of us are
the sole owners of this corporation. This is one of
those businesses that was started back at the forks
of the creek in the small town of Clinton, Oklahome,
in 1930. # + We are still the sole owners, the
directors and officers of the corporation. Under
your discriminatory rule, half of our contribution
is being taken away from us for 1942, 1943, and for
all the years to come. There is another corporation
right here in Texas that we know of that is much
larger than ours, and 98% of their stock is owned by
one man. Under this same discriminatory rule, his
Regraded Unclassified
- 13 -
1/2
corporation can contribute 30% of his salary for his
benefit, whereas ours can contribute only 72% of our
salary, or 30% for the four of us as a class. The
officers of large corporations, such as United States
Steel Company, Montgomery Ward & Company, and General
Electric, will be eligible for contributions from
their corporations of 15% of their salaries because
in no case do any of them own as much as 10% of the
voting stock of the corporation. The rule, in our
opinion, has the effect of benefiting officers of
large corporations and one or two officers who own
small corporations, but it robs the officers of coun-
try corporations such as ours that are owned by three
or four people. # # Is it the policy of the U. S.
Treasury to discriminate against middle-class pro-
prietors of businesses? # Do you believe that a
discriminatory rule of this sort is in keeping with
the true American spirit of equal justice under the
law? We are seeking the truth from you as the
individual who has more to do with the policy-making
of the Treasury Department than anyone else, and the
answers you give us to our questions will enable us
to chart the course of our future as businessmen.
Mowbray F. Pearson, Spokane, Washington. Your Depart-
ment, through Mr. Ray Algeo, head of the Spokane
office, is still trying to collect unemployment com-
pensation on Ace Company's customers. On August 21
I sent a registered letter to you personally, asking
for an abatement of this wholly unjust tax, which
your Department had no right to levy in the first
place. I paid for a person-to-person registered
letter and asked for a return receipt. I did not
even get a return receipt to show you got the letter.
I am entitled to an answer to official corre-
spondence. I insist that you have no right to proceed
further until you answer my letter and demand for
abatement dated August 2, 1944 and registered, and
marked addressee only - return receipt requested. #
The Ace Company, a corporation, sold ice to independent
Regraded Unclassified
13
- 14 -
dealers who took out B. license with the State Tax
Commission to do business. They collected the State
Sales Tax and paid it to the Tax Commission. They
bought their ice outright, stood their own shrinkage
from cutting and melting, decided their own credit
risks, stood their own credit losses, and other
business expenses. The Ace Company paid them no
wages. There was no basis on which to make assess-
ments, so your assessments are wholly unwarranted
and
incorrect.
#
The Ace Company never had eight
employees so it is against the law to levy any assess-
ment. The Department of Internal Revenue has
repeatedly refused the Ace Company or Mowbray F. Pearson
any information about how this assessment was arrived
at. That is prima facie evidence that this is a fraud-
ulent assessment. Demanding unemployment compensation
on customers' unknown profits is impossible from a
businessman's point of view, so the Ace Company went
out of business. Mr. Ray Algeo informs me either
I have to sell some assets to pay this assessment
against the Ace Company, a corporation, or he is going
to do it. He said, "You had better do it because
sales at public auction do not bring very much".
These assets I have accumulated during a period of
49 years of hard work. Now your Department says
I have to sacrifice those assets for 10¢ or 15¢ on
the dollar to pay the assessment against the Ace
Company (which it did not owe), and then I can sue
to get back the amount. What would I get back if
I won the suit? The amount of the tax? The amount
it would cost me to replace what I sold at & tremendous
sacrifice? What about the expense I have already been
to? What about the loss of business and profit?
President Franklin D. Roosevelt talks very glibly of
"Freedom from Fear" and "Freedom from Want" and Social
Security" and "Justice for All". Is that just hollow
mockery, campaign oratory, and double talk that he
produces for window dressing while the bureaucrats
stab citizens in the back when they are trying to make
an honest living? If there is such a thing as honor
and justice in Washington under the Roosevelt Adminis-
tration, I demand an abatement of this unjust assess-
ment that your own records show is wholly unjust. If
you deny an abatement on this request, I demand a
- 15 -
hearing on this matter. There has never been an
open hearing on this at any time. You had a "Star
Chamber" proceeding which I was not notified about,
and at which I was not present, and then decided
contrary to the evidence brought out at the hearing.
C. S. Fensom, Watkins-Cottrell Company, Hardware,
Cutlery, Guns, Etc., Richmond, Virginia. You will
find enclosed herewith a prospectus of the American
Cyanamid Company, dated October 30, 1944, which
probably already has been submitted, or will be sub-
mitted, for your consideration. The writer is also
enclosing a copy of letter he has written in answer
to this plan. No doubt the matter has received very
careful consideration from your department, but it
does seem it is time to stop this excessive retire-
ment plan, which practically all of the very large
corporations have adopted and which is going to im-
pose B. burden later on on the small taxpayer, which
they are going to be unable to meet. # % *
(The following is taken from a copy of a letter
addressed to the American Cyanamid Company, New York
City, by Mr. Fensom.) " " * * I do not care to vote
in favor of the proposition as outlined in your
prospectus. I think it is very unfair and unjust
to the stockholders; it is very nice for the employees.
Too many corporations, whose officers happen to be
well paid, are either establishing a retirement
system of their own or paying to some insurance
company, tremendous amounts of money to handle it
for them. The result is that the stockholders, as
well as the Federal Government, are both penalized,
and the Government surely needs the taxes. It is
making someone else pay tax which should be paid by
corporations.
While profits are reasonable
and dividends can be paid to stockholders, that is
pretty good. But the day is coming, and it may be
sooner than some think, when the net profits are
going to be considerably reduced, and the stockholders
- 16 -
are the first to be penalized. It seems to
the
writer that the big corporations are hedging and it
is making the small people probably pay a larger
proportion of taxes than they should. # Personally,
I wish the Government would prohibit all of the big
corporations from carrying out a plan which is both
penalizing the Government 17 and the stockholders, and
the small business man.
Asa E. Martin, State College, Pennsylvania. The en-
closed pension plan of the American Cyanamid Company
impresses me as illegal and a clear attempt to put
something across. The enclosed was accompanied by
a proxy which called for a grant of voting power to
the Board of Directors of almost unlimited power
without any provision for a negative vote. Since
the individual is practically helpless in cases of
this kind, will you look into the proposal to make
certain that it is a worthy proposition? I can see
no reason for the presentation of the proposal in
advance of your ruling on the case if they do not
have some sinister motive in view. Please read the
enclosed NOTICE TO STOCKHOLDERS and ask to see the
PROXY sent to stockholders.
Regraded Unclassified
25
NOV 3 1944
My dear Mr. Celler:
You have requested an expression of this Department's
views on your resolution, H. J. Res. 287, "To create a
Committee on Federal and State Relations".
The resolution would provide for the creation of a
Committee on Federal and State Relations, to be composed
of three members of the Senate, three members of the
House, and one representative from each of certain de-
partments, including the Treasury Department. It would
further provide that the Committee shall study the rela-
tions between the Federal Government and the governments
of the various States and their political subdivisions
with a view to determining what stops should be taken to
bring about coordination and cooperation among the various
levels of government and thus eventually to solve among
other matters such problems as interstate trade barriers
and conflicting and multiple tax levies. The Committee
would submit a report of its studies and investigations,
together with its findings and recommendations, to the
President and Congress.
The need for coordinating the fiscal activities of
Federal, State, and local governments has long been
recognized by this Department. In appearing before the
House Ways and Means Committee on May 27, 1939, I suggested
"that Congress create a small temporary national commission
to report to Congress as soon as feasible on the various
aspects of intergovernmental fiscal policy and propose a
plan for the solution of the problems involved". In a
letter of April 4, 1940, to Representative Treadway on
H. J. Res. 35, 76th Congress, 1st Session, I reiterated
the need for such a commission, stating, I have always
regarded the problem of Federal-State confliets in
Regraded Unclassified
117
- 2 -
taxation and overlapping of taxes as one of particular
urgency, calling for the earliest possible consideration
and solution".
In June 1941, I appointed the Committee on Inter-
governmental Fiscal Relations to make a thorough-going study
of this subject. This committee submitted its report to no
in January 1943. The Report has since been printed, pursuant
to Senate Resolution 160, as Senate Document No. 69, 78th
Congress, 1st Session (595 pages). The subjects it covers
are indicated by the following list of chapter headings:
I. Development of the Coordination Problem.
II. Coordination Devices and Institutions.
III. Problems of Interstate Relations.
IV. Problems of Federal-State-Local Relations.
V. Fiscal Policy.
VI. Miscellaneous Problems.
VII. Specific Taxes (Income, Business, and
Death Taxes).
VIII. Specific Taxes (Excise, Sales, and Pay-
Roll Taxes).
IX. Specific Expenditures.
The study proposed by E. J. Res. 287 would be valuable
in further focusing attention on the urgent problems of
Federal-State relations and would be helpful in the search
for appropriate solutions to such problems. I should like
to suggest, however, that in the interests of & balanced
point of view, the bill be amended to provide for the appoint-
ment of representatives of the States and their subdivisions
to the proposed Committee on Federal and State Relations.
The Department has been advised by the Bureau of the
Budget that there is no objection to the submission of this
report to your Committee.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
Hon. Emanuel Celler,
House of Representatives.
Regraded Unclassified
EXECUTIVE OFFICE OF THE PRESIDENT
108
BUREAU OF THE BUDGET
WASHINGTON, 25, D.C.
OCT 28 1944
My dear Mr. Secretary:
This will acknowledge the receipt of Administra-
tive Assistant Bell's letter of October 25, 1944, trans-
mitting two copies of your proposed report to Congress-
man Celler, relative to H. J. Res. 287, "To create a
Committee on Federal and State Relations."
One copy of your proposed report is returned here-
with, and I an authorized by the Director of the Bureau
of the Budget to advise you that there would be no objec-
tion to the submission thereof to Congressman Celler.
Very truly yours,
V. Do Almond,
Acting Assistant Director,
Legislative Reference.
The Honorable,
The Secretary of the Treasury.
Enclosure:
Copy of proposed report.
Regraded Onclassime
EXECUTIVE OFFICE OF THE PRESIDENT
BUREAU OF THE BUDGET
WASHINGTON, 25. D.C.
AUG 26 1944
My dear Mr. Secretary:
Advice has been requested of the Bureau of the
Budget as to the relationship to the program of the
President of the proposal contained in H. J. Res. 287,
a resolution "To create a Committee on Federal and
State Relations."
Before giving advice regarding this proposal, the
Director of the Bureau of the Budget would appreciate
receiving an expression of your views with respect
thereto.
Very truly yours,
Legislative Reference.
Assistant they Director,
The Honorable,
The Secretary of the Treasury.
B-27
Regraded Unclassif
EMANUEL CELLER
10TH DISTRICT New York
HEW YORK OFFICE
1450 BRGADWAY
New York Crry
MEMBER OF
ITTEE ON THE JUDICIARY
Congress of the United States
1934 NEW HOUSE OFFICE BUILDING
WASHINGTON
WASHINGTON SECRETARIES
BESEIE EFFRAT MARGARET amooka
House of Representatives
NEW YORK SECRETARIES,
Mashington, D. €.
JACOB GRALLA
MARY DOUGHENTY
June 22, 1944
Honorable Renvy Mory nthau, Jr.
Secretary of the Treasury
Washington, D. C.
My der Mr. Secretary:
Enclosed ple: find D bill I have offered
to,ret "I" wi', explanatory statement.
I youl appreciate your visa Herson. I expect
to have a hearing on E. J. San. 287 (irectly ater the
coning rece .s. S. Your observations would be timely and
most welcome.
With assur nce: 0° highest enteem, I am
Sincerely yours,
Emount Scelle
EVANUEL CELLER
Enc:
Regraded Unclassified
151
NOV 3 1944
Dear Mr. Hinckley:
I have your letter of October 30, 1944,
advising of your desire to establish in your
office a legal committee to advise with your
General Counsel on questions of law that will
arise from time to time under the Contract
Settlement Act. Mr. Thomas J. Lynch, Assistant
General Counsel, will represent this Department
on such committee.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
Honorable Robert H. Hinckley,
Director, Office of Contract
Settlement,
Federal Reserve Building,
Washington 25, D. C.
JJO'C:mv
Regraded Unclassified
OFFICE OF CONTRACT SETTLEMENT
FEDERAL RESERVE BUILDING
WASHINGTON 25, D.C.
(Folur)
DIRECTOR
Ey3300
01h othing
October 30, 1944
The Honorable
Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Dear Mr. Morgenthau:
I have come to the conclusion that it would
be desirable to establish at this time a legal committee
of the Contract Settlement Advisory Board to advise with
the General Counsel of this Office on questions of law
that are arising under the Contract Settlement Act and
otherwise. I should therefore appreciate your informing
me of the name of the individual you have selected to
represent you on this committee.
Sincerely yours,
Robert H. Hinckley
Regraded Unclassified
mt
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
November 3, 1944
TO THE SECRETARY:
On November 1 you sent Harry White and
me a memorandum regarding the investigation
of American banks in Paris, and suggested
that we advise the Secretary of War what we
are doing SO that he does not nlace new re-
sponsibility with them.
At the suggestion of General Carter we
have designated five of the American banks,
including the American Express Company, as
government depositaries. This was done for
the nurnose of enabling them to file applica-
tion with the State Department for passports
for their employees who would 20 from the
United States to France.
The War Department was told, however,
that no official use will be made of any of
these American institutions until the whole
matter has been further clarified. The War
Department will not, therefore, deposit any
funds with these banks until General Eisenhower
approves the entry into France of representa-
tives of American firms. Finance officers in
France have been authorized to use the Bank of
France and its branches so that there is no
immediate problem in this connection.
DWB
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
November 3, 1944
TO
Secretary Morgenthau
FROM
Mr. White
You called to my attention the report that American
sailors, uninformed of the regulation permitting Americans
to carry only 2 bills into Mexico, have debarked there
carrying 5, 10 and 20 bills and have been compelled to
accept scalpers' discounts on them. You asked that I do
something about it.
I have conferred with Foreign Funds Control and it has
been decided to amend the pertinent regulation to permit
Americans to carry $5, 10 and $20 bills. A cable has been
prepared asking the American Embassy in Mexico City to confer
with the Mexican authorities with the view of securing joint
action to that effect. The Mexican Government is being in-
formed of the experience of American sailors end nen of the
Merchant Marine, and a roquest is Veing made that provision
be made for the interchange of dollars and pesos at par.
For purposes of effective enforcement Mexican regula-
tions have been parallel to our own, and the lifting of the
ban on these other denominations accordingly requires that
the two Governments proceed jointly.
Regraded Unclassified
NOV 4 1944
25
In reply please
refer to: 74850
To:
Mr. Francis H. Russell
Division of World Trade Intelligence
Department of State
From: Orvis A. Schmidt
It would be appreciated if the following message were dispatch-
ed to our Embassy in Mexico:
"Reference Treasury Department General Ruling No. 14 prohibiting
the exportation of United States currency to Mexico; and the decree and
regulations of the Republic of Mexico prohibiting the holding in, the
importation to, and the exportation from, Mexico of United States our-
rency. Treasury, in attempting to improve the operation of its currency
controls and to redues to a minimum any interference of such controls
with normal commercial activity, has from time to time considered the
desirability and feasibility of relaxing these controls, where such action
would not result in any benefit to the ensay. Treasury feels that the
excellent cooperation given by the Nexican Government since inception of
the controls under reference has considerably minimised the possibility
of Mexico being utilised as a dumping ground for looted currency, and
that there may be accordingly some justification for relaxing these con-
trols to some extent. An 6 result, Treasury is presently considering a
program whereby existing controls would be modified to permit U. S. dollar
notes of $1, $5, $10 and $20 denominations, in addition to $2 bills and
minor coins to cross the border between the United States and Mexico.
"Because of the joint nature of the controls affecting dollar
currency movements within and between Mexico and the United States,
Treasury will not take any action with respect to nodifying such controls
without first obtaining the views and concurrence of the Mexican Govern-
ment. You are, accordingly, requested to discuss with the appropriate
Mexican authorities the modification currently under consideration by
Treasury and discuss with them the steps that concurrently would have
to be taken by them to accomplish the desired relaxation. If the Mexican
authorities agree to this relaxation, it will be necessary for them to
modify their decree so as to make legal in Mexico the holding of, or
dealing in, United States currency in denominations of $1, $2, $5, $10
and $20. The present Mexican import and export prohibitions should also
be modified to permit the importation or exportation directly from or to
Regraded Unclassified
1 FG
- 2 -
the United States of such denominations of U. 3. currency. In these
discussions, you should impress the Mexican authorities with the de-
sirability of examining their import controls 80 as to prevent a possible
influx of dollar currency into Mexico from countries other than the
United States and to prevent Mexico being used as a conduit for the re-
turn of looted currency to the United States. Special provision must,
however, be made to permit members of the armed forces of the United States
and nembers of the U. S. Merchant Marine who debark from U. 3. ships in
Mexican ports to import into Mexico U. S. currency in denominations of
$20 or less and to exchange such currency for Mexican pasos at par.
Treasury has been informed that at present U. S. soldiers, marines and
sailors debarking at Acapulco are unable to exchange currency in denomina-
tions of other than $2 except at a substantial discount and desires that
this matter be corrected as quickly as possible. With reference to your
Airgram A-3665 of October 10, 1944, the above proposed relaxations of the
currency controls on the Mexican border would simplify the enforcement
task of Customs, thereby enabling them to exercise greater care with
respect to large denomination currency.
"You are requested to report urgently the results of your dis-
cussions with the Mexican authorities as well as your views and recom-
mendations with respect to this matter."
The Department will appreciate being advised of the Embassy's reply
in this matter just as soon as it is received.
Cyvia A. Schmids
JLewis: EMishkin: TAlk: JSRi chards: ems 11/3/44
Regraded Unclassified
157
NOT NOV 3 1944
Dear Doens
This will acknowledge your letter of October 30,
1944 in which you request authorization to designate
Harold Classer as the permanent United States represen-
tative on the Committee on Financial Control of the
Council of the United Nations Relief and Rehabilitation
Administration.
I an glad to have your statement of the value of
Mr. Classer's services on UNRRA problems on previous
occasions. . The Treasury Department is pleased to auth-
orise his designation M the permanent United States
representative on the Committee on Financial Control.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
The Honorable,
Dean Acheson,
Assistant Secretary of State.
SGaDrl -11/1/44
Regraded Unclassified
OFFICIAL COMMUNICATIONS no
THE SECRETARY OF STATE
WASHINGTON, BC
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
A-A
October 30, 1944
Dear Henry:
I refer to our exchange of letters last August
when you were 80 kind as to designate Harold Glasser 88
a member of the delegation which accomoanied me to the
Second Session of the Council of the United Nations Relief
and Rehabilitation Administration. In addition to general
advice to me on a variety of financial matters, including
questions which arose in connection with the Italian program,
Harold served as the United States representarive on the
Committee on Financial Control of the Council of which I
am Chairman. As was the case at the First Session in
Atlantic City about which I wrote you last December,
Harold's services throughout the Session were of tremendous
value to me and all of the other members of the delegation
and I am most appreciative of your having made his services
available for the Session.
The Committee on Financial Control is a permanent
committee of the Council which meets from time to time, on
an average of about once every six weeks, to consider a
variety of financial questions within its competence. 1
believe that it would be appropriate in view of the functions
of this Committee for the Treasury Department to furnish
the United States voting member. Since Harold Glasser 1e
thoroughly familiar with the financial problems of UNRRA
since its inception, I should be most grateful to you if
you would authorize me to designate him as the permanent
United States representative on the Committee.
Sincerely yours,
CARM Pochroom
The Honorable
FORDEFENSE
Henry Morgenthau, Jr.,
Assistant Secretary
Secretary of the Treasury.
BUY
UNITED
STATES
SAVINGS
BONDS
Regraded Unclassified
JTA features
Release Date
November 3, 1944
HENRY MORGENTHAU JR. - THE VOICE BEHIND THE WAR REFUGEE BGARD
By MURIEL LEVIN
Copyright, 1944, Jowish Tolegraphic Agency, Inc.
WASHINDTON--
It 1a not generally known, but Henry Morgenthau, Jr., for twolve years soore-
tary of the Treasury, is the weighty voico behind the War Refugee Board.
A tall, shy men whose relations with the press - and consequently the public -
have been awkward Margenthau is the type of administrator who fosture initiative in
the experts he harnesses for the Treasury Department, though he maintains the whiphend
throughout. Logendary are the daily meetings of his *9,30 group." Gathered at c.
round table every morning, ench of his assistents in turn has c. ohonoo to voice his
problems and gripos, and the group, very much dominated by Morgenthau, acuks ways out
of dilemnaa.
It WO.B not at one of those meetings that the idec of the for Refugee Board was
advanced, according to Herbert E. Gaston, senior Assistant Secretary of the Treasury,
upon whom Liorgenthou leans heavily for public relations. But it might well have been,
and it WILD this willingness to listen to his underlings that resulted in his being
approached by a group of young Treasury Dopartment cides, unong whom were Randolph
Faul, then general consul, and John W. Pohle, n. special assistant in charge of the
foreign funds control.
They know, too, that Morgenthau, son of c. distinguished Jewish lewyer and
philanthropist, who mnde c. fortune in Bronx real estate, his had d. well-davuloped
"sooial conscience" since his teens when his desire to improve social conditions drew
him to work at the Benry Street Settlement in New York. Later, when he had forscken
real estate and banking for forming in upstate New York, he and his young vife, Elinor
Fatman, a nice of the Lahmons, furnished East Fishkill Township with its first clinic,
organized c, small mobilo library, and ran a cruscding farm magazine.
Appalled by the terror in Europe, brought into focus for thom through their
dealings with refugees here whose funds they controlled, the Treasury Department cidos
broached to Morgenthau the idea of D. S. notion to save the Jews from the fate decreed
by the Nazis. They tr.lked feat and often - and sold Morgenthou the bill of goods. Be
agreed to talk to the President.
The Roosevelts and the Morgenthaus here been friends for more than thirty
years. In 1912 when Roosevelt WELS E. New York State Senator, Morgenthou, gr., whom
Wilson Inter appointed U. 8. Ambassador to Turkey, WC.B chairman of the finance com-
mittoo of the Democratic National committoe. It WC.5 tDemocratic hondquarters in
Menhottan, then, that the two mer. met, t.nd they begen to sue = good donl of one an-
other C for years later when both were country squires in Duchoss country. All during
Rooseveit's serious illness the llor enthaus were around. Then, in 1926, Norgenthau
participated in gubernatorial compaign tours, and went to Albany with Rooscvelt, first
to hecd his Agriculturel Advisory Committee, which drafted form-rolief metourcs, and
later to act 0.8 conservation commissioner. Ee followed Roosevelt to Washington in
1933 ne chairman of the Federal Form Board. He quickly consolidated all government
form lending agencies into the Form Credit Administration, which soon was lending
millions to formers.
He become Roosevelt's Scoretary of the Treasury in January, 1934, when
gearetary Woodin resigned because of ill-hec.lth just three months after Horgenthou
had been appointed Under-Seoretory of the Treasury. His relations with Nin boss have
continued to be intimate, dospite the "models of form lity" by which lse communicatos
with the White House. Both families visit one another and make mrry together.
just how Morgenthou convinced his old friend is something that he has not
revecled. But on January, 23, 1944, the President net up by Executive Order C war
Refugee Board consisting of the Secretary of state, the Sucretary of the Tressury and
Copyrighted by Jewish Telegraphic Agency,Inc/06 East 4/st Street, N. N.U.C.
Regraded Unclassified
160
LEVIN
11/5/44
the Secretary of War, to resoue from the Nasis as many as possible of the perseouted
minorities of Europe. Be streesed that "it was urgent that action be taken at a
minorities in Europe."
to forestall the plan of the Nasia to exterminate all the Jone and other persecuted
Appointed coting executive director was one of the young Treasury Department
aides, John 7, Fehlo, whom Morgenthnu granted leave of absence from his regular post.
The WRB office WC.B set up in the Treasury Department building, and drew much of its
personnel and cquipment from that Department.
Whother or not Morgenthau directly diotates the day-to-day policy is a moot
question, but the Secretary is kept fully informed of what 10 going on at every moment.
There is little doubt that he of the three Board members pluge, books, fights for the
WRB. When the President's policy on ind ration to the United Statos appeared a
little hasy, Morgenthau and Pehle were seen crossing the street from the Treasury
Department to the side entrare of the white House. Next press conference, the
President's policy on immigration to the United states appeared a good deal less hosy,
and in the not too distant future he announced the estchlishment of Port Ontario as
an "emergency refugee shelter." One thousand refugees were to be admitted to the
United States ns c talking point before the rest of the world, for the WRB bad been
severely hampored by having our country's failures thrown in its face.
When it appeared that something might be done for the Hungarian Jews through
Admiral Horthy's offer to the International Red Cross to release those with cutrance
visco to Palestine and claewhcro, the British provided bottlensoks. Morgenthau, on A
tour of ver theaters to investigato ourrency matters, hied himself to the top man in
England and talked turkey. In short order, the United States and Great Britain issued
= statement cooopting Eorthy's offer. Unfortunately, mos deportations were resumed
after G shake=up in the Hungarian cabinet, and BO his efforts appear to have been of
little ovnil.
Macambile, the progress of the wer in Europe has been solving many of the War
Refugec Board's problems. Employees are optimistically pacing bets that they will be
out of jobs within C. few months, for the fell of Ritlor means finis for the War Refu-
goo Board.
But it looks very much as though Morgenthau may remain in Washington for
another four yours. Anymy, the odda are with hime
Regraded Unclassified
161
CABLE TO WINANT, LONDON, FOR MANN FROM WAR REFUGEE BOARD
Assume you are forwarding material mentioned in second paragraph
of your No. 8123 of September 29. Please advise at once.
THIS IS WRB LONDON CABLE NO. 20.
11:15 a.m.
November 3, 1944
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Cohn, DuBois, Friedman,
Hodel, Lesser, Mannon, McCormark, Files
FH:hd 11/2/44
Regraded Unclassified
162
November 3, 1944
10 p.m.
AMEMBASSY
LONDON
9218
The following for Mann is WRB 20.
Assume you are forwarding material mentioned in second
paragraph of your No. 8133 of September 29. Please advise
at once.
STETTINIUS
ACTING
(GLW)
WRB:MMV:KG
11/3/44
Miss Chauncey tor the Sec'y) Abrahamson, Ackermann, Aksin, Cohn, Drury,
Files. DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack, Pehle,
t
Regraded Unclassified
163
November 3, 1944
Midni.ght
AMEMBASSY
LONDON
9220
The cable below for Mann is WRB 19
The following message under date of October 30 has been
received from Katski.
QUOTE The Jewish Agency Istanbul is in receipt of a telegram
via Geneva dated October 25 from the Jewish Agency representative
Kreuss in Budspest stating that exit permits for the first group of
2,000 Palestine certificate holders in Hungary will be secured,
Kraues states that the projected route of travel is through Switser-
land and Portugal. He requests the aid of the WRB in obtaining the
necessary transit visas. We suggest that you verify Krauss's
report with McClelland in Switzerland. Information received in
Istanbul concerning the Jews in Hungary is meager and general, but
unconfirmed Turkish newspaper reports that evacuation of Hungary
may be in contemplation. Future developments may make advisable
renewed inquiry at this time regarding possibilities for emigration
from Hungary.
According to Jewish Agency the 2,000 certificate holders are
still in Budspest and they are in possession of passports. UNQUOTE
The substance of the message has been cabled to Harrison and
McClelland with the following instructions
QUOTE Please verify above information and, if correct, please
take all necessary steps to ensure speedy Saies action to enable
the certificate holders from Hungary to reach Switserland without
delay. You my assure Swiss authorities that this Government will
use.its best efforts to secure the unimpeded progress of the
certificate holders to Palestine. UNQUOTE
Please represent to British authorities the Board's view that
this unexpected chance to rescue some of the documed June in
Budapest, if verified, confronts Great Britain and United States
with an opportunity that may not be allowed to end in failure w
reason of any hesitation or delay on the part of either of our two
governments. This Government is determined to spare no effort in
interceding with Smiss, French, Spanish, and Portuguese officials
in the interest of securing speedy transportation of the certificate
holders in accordance with the suggested routing and is prepared to
recomend to the Allied military and shipping authorities to min
possible their speedy transportation by rail and by boat.
Miss Channey (for the Sec'y) Abrahamson, Ackermann, Akain, Cohn, Drugy,
Files. DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack, Pehle,
Regraded Unclassified
164
- % -
It is earnestly hoped that British authorities will view the
situation in an identical light and will take similar steps to make
possible the early departure of the certificate holders for
Palestine.
Please advise Department and Board of British reaction.
STETTINIUS
(ACTING)
(GLW)
WRB:MMV:KG
BC
WE
NE
SE
11/2/44
Regraded Unclassified
165
CABLE TO AMERICAN DELEGATE, ROME. FROM WAR REFUGEE BOARD.
PLEASE deliver the following message to Arthur Greenleigh from
Joseph Schwarts of the American Jewish Joint Distribution Committee:
QUOTE YOUR OCTOBER 29 FULL NAME IS ISRAEL GAYNOR JACOBSON
NOT JACOBS. PLEASE MAKE NECESSARY CORRECTION YOUR END ORDER
AVOID COMPLICATIONS HERE. HOPE BE IN FRANCE ENROUTE SWITZERLAND
IN TEN DAYS TO TWC WEEKS THEREFORE SUGGEST YOU MAKE EVERY EFFORT
MEET ME THERE OUR PARIS ADDRESS 19 RUE DE TEHERAN. WE HAVE NOW
FRENCH PERSONNEL THERE WHO WILL BE ABLE ASSIST YOU UNTIL ADDITIONAL
AMERICAN PERSONNEL AVAILABLE. PARIS OFFICE IN CHARGE NOW MAURICE
BRENNER FRENCH NATIONAL AND JULES JEFROYKIN EXPECTED ARRIVE THERE
SHORTLY. HARRY BIELE NOT AVAILABLE AND THUS FAR FRENCH GOVERNMENT
HAS RESTRICTED ENTRY TO YOU AND ME. FOR YOUR INFORMATION PALESTINE
CERTIFICATES AUTHORIZED FOR ITALY TOTAL 900 FOR NEXT SIX MONTHS
AND NOT 900 MONTHLY WHICH SEEMED YOUR IMPRESSION. UNQUOTE
11:15 a.m.
November 3, 1944
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Cohn, DuBeis, Friedman,
Hedel, Lesser, Mannon, McCormack, Files
RDryry 11/2/44
Regraded Unclassified
166
CABLE TO NORWEB, LISBON, FROM WAR REFUGEE BOARD.
Please deliver the following message to Robert Pilpel from
Joseph Schwarts of the American Jewish Joint Distribution Committee:
QUOTE ARTHUR GREENLEIGH ROME ADVISES HE HAS ARRANGED
MILITARY CLEARANCE FOR RESNIK ENTER ITALY VIA LONDON. EXPECT
SEE YOU BRIEFLY LISBON ENROUTE LONDON AND IF RESNIK HAS NOT
YET DEPARTED PLEASE ASK HIM AWAIT MY ARRIVAL. UNQUOTE
THIS IS MAR REFUGEE BOARD LISBON CABLE NO. 111.
11:15 a.m.
November 3, 1944
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Cohn, DuBois, Friedman,
Hodel, Lesser, Mannon, McCormack, Files
RDrury 11/2/44
Regraded Unclassified
167
JMM-976
PLAIN
Lisbon
Dated November 3, 1944
Rec'd 6:19 a.m., 4th.
Secretary of State
Washington
3852, Third, 6 p.m.
FOR LEAVITT FROM PILPEL JDC 111 WRB 245.
Further our 106 steamship SELAHATTIN carried
approximately 275 Hungarians including 24 recently
released from prison camp Bor Tugoslavia approximately
212 Rumanians and 60 Caechoslovakians. Group had 5
children 133 women 409 men and entrained for Palestine
October 31.
NORWEB
WMB
Regraded Unclassified
168
RB-211
Distribution of true
Madrid
reading only by special
arrangement. (SECRET W)
Dated November 3, 1944
Rec'd 6:30 p.m. 4th
Secretary of State,
Washington.
3640, November 3, 9 a.m.
Department will see from my despatch 3169
October 2 that Embassy on its own initiative
suggested to Spanish Government on September 25
desirability of latters endeavoring to arrange
for temporary entry into Switzerland of 155
Sephardic Jews mentioned in Department's 2904
October 28. Foreign Office official states
that instructions in pursuance of Embassy's
suggestion have already been sent to Berlin
and are being sent also to Spanish Minister
in Bern.
HAYES
WMB
Regraded Unclassified
169
CABLE TO MINISTER JOHNSON, STOCKHOLM, FOR OLSEN, FROM WAR REFUGEE BOARD
Reference your 4432, October 31 and terminology "unassimilated
persons in concentration camps." The Geneva Convention on Prisoners of
War has, by agreements between certain powers, been applied to civilian
nationals detained by the enemy and who are said to be thereby assimilated
to the status of prisoners of war thereby obtaining the same rights and
privileges as military prisoners of war. Such civilians so held in
special civilian internment camps are reported through Intercross to
countries of their nationality and are accorded rights and privileges
described in the convention such as despatch and receipt of mail, receipt
of food parcels and clothing and visits by Intercross delegates. Persons
detained by enemy governments in concentration camps such as Belsenbergen,
Westerbruck and Krakow are not covered by these agreements and therefore
are commonly referred to as "unassimilated persons." It is to this
category of detained persons that the Board's parcel program, 93 ton
program from Sweden and similar undertakings are directed in keeping with
Berle-Foot agreement authorizing programs of this nature.
Please convey Board's appreciation to Whisler for his work in
restoring our parcels for forwarding.
THIS IS WRB STOCKHOLM CABLE NO. 233.
11:15 a.m.
November 3, 1944
Regraded Unclassified
170
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Legation, Stockholm
TO:
Secretary of State, Washington
DATED:
November 3, 1944
NUMBER:
4506
CONFIDENTIAL
Please see the last sentence of my 4395 dated October 28; also please
see my message dated November 1, No. 4455.
With regard to investigation as to which Latvians the transfer of
money would benefit, this investigation indicates that in seven work
centers in Sweden there are 2800 Latvian refugees and that the funds pro-
posed would be used for practically all of them, for food and clothing
in particular. Also for medicine for those who need it the funds would
be used. Practically all Latvian refugees are in real need of support
it is reported. The chairman of the Latvian committee through which the
Swedish Red Cross would dispense the money is the former Latwian länister
to Sweden, who as a refugee remained here. Only those who are already
in Sweden would bemefit and there would be no use of these funds for the
states. further escape of Latvians to Sweden from Latvia, the Swedish Red Cross
There exist varying gradations of political opinion among the
Latvian refugees but it is true of course that they have a common
antipathy for the USSR which is strong enough to have been their primary
motive for leaving Latvia, in most cases. The Russians look upon
practically all of them as being people who are Latvian Soviet citizens
and for this reason it is inevitable that there is political complication
over the issue.
JOHNSON
DCR#LCW#MIM 11-7-44
Miss Chauncey (for the Sec'y) "brahamson, Ackermann, Aksin, Coln, Drury,
Pehle, Files.
DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack,
Regraded Unclassified
171
CABLE TO MINISTER HARRISON, BERN, FOR MCCLELLAND, FROM WAR REFUGEE BOARD.
Please deliver the following message to Mrs. Regina Kaegi, 81
Wibrichstrasse, Zurich, from Frank Kingdon and Sheba Strunsky of the
International Rescue and Relief Committee:
QUOTE NO REPLY FROM RENE MANY WEEKS STOP ESSENTIAL WE
HEAR FROM YOU OR RENE SOONEST ON COMPOSITION AND LOCATION
FRENCH COMMITTEES STOP FUNDS FOR FRANCE MUST NOW BE TRANSMITTED
DIRECTLY STOP NEED IMMEDIATELY NAME AND ADDRESS OF FRENCH
CITIZEN MEMBER OF COMMITTEE STOP RECEIVED EXCELLENT REPORT
YOUR ACTIVITIES DATED MARCH AND SEPTEMBER MUST MAKE CLEAR ALL
FUNDS WE SEND ARE FROM NATIONAL WAR FUND CONTRIBUTED TO THEM
BY THE PUBLIC AND TRADE UNION FEDERATIONS STOP OUR PORTION
DESIGNATED FOR PRODEMOCRATIC POLITICAL LABOR AND INTELLECTUAL
REFUGEES WE RECEIVE NO PRIVATE FUNDS STOP OGLIATI CAN EXPLAIN
FULLY STOP ESSENTIAL WE RECEIVE MORE FREQUENT CABLES UNQUOTE
THIS IS WRB BERN CABLE NO. 260.
2:15 p.m.
November 3, 1944
RDrury 11/3/44
Regraded Unclassified
172
DOG
This telegram must be
paraphrased before being
November 3, 1944
communicated to anyone
other than a Government
10 p.m.
Agency. (RESTRICTED)
AMLEGATION
BERN
3760
The cable below for Harrison and NoClelland is WRB 255.
On October 30 the Board's representative in Ankara reported
substantially as follows:
QUOTE A telegram dated October 25 from Jewish Agency's
Budapest representative Drawss received by Jewish Agency Istanbul
stated that exit permits will be procured for the first group of
2,000 Palestine certificate holders in Hungary. The projected
route of travel would be through Switzerland and Portugal, accord-
ing to Krauss, who requests aid of WRB in procuring the necessary
transit visas. Verification of Krauss's report with McClelland in
Switzerland is suggested. Only meager and general information
concerning Jews in Hungary obtainable in Istanbul, but unconfirmed
reports thattermoustion of Hungary may be in contemplation con-
tained in Turkish newspapers. Future developments my make
renewed inquiry advisable at present concerning emigration from
Rungary possibilities. Jewish agency states the 2,000 certifi-
cate holders possess passports and are still in Budapest. UNQUOTE
Kindly verify above information. If correct please take all
steps necessary to ensure swift Swiss action to enable surival
Switserland without delay of certificate holders from Hangary.
Swies authorities may be assured that this Government will use its
best efforts to procure unimpeded progress to Palestine of these
certificate holders.
Kindly inform Department and Board whether Ankara report is
correct and of steps in this matter that you may undertake.
Stettinius
(ACTING)
OHN
WRB:MMV:KO
WE
XX
88
11/2/44
Regraded Unclassified
173
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Legation, Bern
TO:
Secretary of State, Washington
DATED:
November 3, 1944
NUMBER:
7304
CONFIDENTIAL
We are informed by Swiss note dated October 31 that message
contained in Department's cable of October 6, No. 3435 (WRB) 198 was
transmitted by Swiss Legation, Budapest to Hungarian Foreign Office on
October 28. You are referred to my cable of October 12, No. 6793. The
failure of initial message to reach Budapest (which necessitated repiti-
tion recently) caused the tardy delivery of notification, according to
the Swiss.
HARRISON
DCR:GPW
11-4-44
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Akzin, Cohn,
DuBois, Brury, Friedman, Gaston, Hodel, Lesser, Marks, Mannon,
McCormack, Pehle, Files.
Regraded Unclassified
174
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Legation, Bern
TO:
Secretary of State, Washington
DATED:
November 3, 1944
NUMBER:
7313
SECRET
McClelland sends the following for WRB.
The following is from Riegner for Kubowitski and Goldman of
World Jewish Congress.
We are confidentially advised by Carl Burckhardt (following
our repeated intercessions with ICRC concerning handling of Jewish deportees as
civil internees under terms of Tokyo project and Geneva Convention), that ICRC
directed an official note on October 2 to German Ministry of Foreign Affairs
asking that all foreigners held in Germany and German-occupied areas (in fact,
designated as "schutzhaeftling" of foreign citizenship and deprived of freedom
of movement), be given identical guarantees to those provided by Tokyo project
and Geneva Convention. This designation applies to all foreign Jews held or
deported in Germany or German-occupied territories, as well as all political
prisoners and foreign workers, according to Burckhardt. The answer of the
Government of Germany is being awaited by ICRC now.
Through WRB, documentation covering our dealings with ICRC in
this connection have been forwarded to you.
HARRISON
DCR:GPW
11-7-44
Regraded Unclassified
175
LFG-799
Damasous
This telegram must be
paraphrased before being
Dated November 3, 1944
communicated to anyone
other than a Government
Rec'd 6:50 p.m.
Agency. (RESTRICTED)
Secretary of State,
Washington.
31, November 3, 4 p.m.
Demenstrations pretesting against 4d. Zienist state
in Palestine were held in Damascus yesterday the 27th
anniversary of Balfeur declaration as fereteld in my
30, October 26. They were, however, very orderly and
the Government, apparently fearing that demenstrations
wight get out of hand and be used for pelitical purposes
oid not permit any pertien of the city to be closed
as originally planned.
The demonstrutors were mestly composed of students
and were addressed by the Prime Minister. One group
of about 100 Moslem students marched to the Legation
but caused no distumbance. Their representatives and
those of the university students called on me, however,
to pretest against the statements of American peliticans
advecating a Jewish commonwealth. Two committees represent-
ing the association organized former students of the
American University at Beirut mentioned in my telegram
No. 30 and another asseciation of leading deputies and
jourmalists also called and left netes of pretest. A
number of telegrams of protest were also received
from various associations.
While earmestly defending their cause and expressing
disappoimtment in the attitude teward Palestine of
President Reesevelt, Dewey and others the visiters
took pains to express their admiration and friendliness
otherwise for the United States.
SATTERTHWAITE
EMB
AMB
Regraded Unclassified
CORRECTION
176
November 3, 1944
Re 2079 from Ankara dated October 30, 2 p.m.
On page one line eleven please delete "fourth" and
insert "forced" making line read "who were liberated
from the
from the forced labor mine at Bor.".
Correction from Embasey, Ankara.
DIVISION OF COMMUNICATIONS AND RECORDS
MJF
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Akain, Cohn, Drury,
Files. DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack, Pehio,
Regraded Unclassified
SECRET
COPY NO
U
177
NOT TO BE RE-TRANSMITTED
OPTEL No. 357
Information received up to 10 A.K. 3rd November 1944.
1, NAVAL
Amphibious Operations. Casualties in landing craft during
operations 31st/lst nine sun & and eight damaged.
Home Waters. lst/2nd. MTB's torpedoed a 3,000 ton cargo ship
and damaged escorting vessels off HOOK OF HOLLAND; also engaged
minesweepers off IJMUIDEN.
2nd. Two of H.M. Monitor's resumed bombardment gun positions
on WALCHEREN hitting one battery repestedly. Off SCHELDT two mine-
sweepers hit by heavy fire from enemy shore batteries. German
hospital carrier with armed crew intercepted between North and
South BEVELAND.
Southern France 30th/Slst. A French Cruiser and Destroyer as
well as a U.S. Destroyer bombarded enemy positions
and M.T.
2. MILITARY
Western Europe To 12 noon, 2nd. on WALCHEREN ISLAND progress
made from WESTKAPELLE briggehead. U.K. Troops
captured DO BURG and passed through ZOUTELAND. Fierce fighting
in FLUSHING where U.X. troops hold most of town with still some
resistance in Western outskirts.
During night lst/2nd Canadian troops pushed back from bridgehead
on East of "/ALCHEREN, but regained foothold on the Island after intense
fighting during 2nd. Canadian troops have captured KNOCKE and
WESTCAPELLE. Enemy strong point still holding out north of CADZAND.
In South substantial gains made in VOSGES foothills. BACCARAT and
several villages ceptumed.
Burma In CHIN HILLS, British troops have reached positions 7 miles
NE and 4 miles S. of FORT WHITE. Advancing down KABAW
Vallay our troops have captured several enemy positions and now within
10 miles KALEMYO.
Northern Burma Allies troops have captured MAWLU, 18 miles
N. of INDAW.
3. AIR OPERATIONS
Western Front lst/2nd. 1,191 tons dropped on OBERHAUSEN and
63 on BERLIN. 2nd. 181 excorted Lancasters
(4 missing) dropped 940 tons on HOMBERG Synthetic Jil Plant; bombing
accurate, no fighters encountered. 1,168 U.S. Heavies (40 missing)
escorted by 934 fighters (28 missing) attacked synthetic oil plants,
dropping 223 tons on STERKRADE, 1223 tons MERSEBURG (LEUNA) and
360 tons CASTROPRAUXEL; also 348 tons on railway viaduct BIELEFELD.
Results BIELEFELD fair to good, remainder unobserved. Enemy opposition
strong, 3/400 fighters.
Bombers claim 36:35:27 and fighters 132:5:25 in combat besides
25 : on the ground. A number of our missing fighters believed landed
on continent. 147 U.S. bombers of A.E.F. drop ned 233 tons on five
railway bridges in Western GERMANY with good results. 918 fighters
and fighter bombers attacked strong points WALCHEREN ISLAND, commun-
ications in HOLLAND and WESTERN GERMANY and provided cover for nagal
forces.
2nd/3rd. Aircraft despatched: DUSSELDORF 991 (21 missing),
ONASBRUCK 42, Other missions 86,
Mediterranean lst. 237 fighters and fighter bombers attacked
communications in PO Valley and YUGOSLAVIA. 77
locomotives and 108 railway wagons destroyed or damaged.
LATE
NEWS.
NAVAL lst/2nd. Two British Destroyers operating West of
PAG ISLAND (N.E. ADRIATIC) sank two enemy
Destroyers. A third enemy Destroyer later engaged and believed sunk.
Three officers and 68 ratings prisoners.
Regraded Unclassified
178
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Nov. 4, 1944
TO:
Miss Chauncey
FROM: Ted R. Gamble
We have received several messages on our teletype regarding
the Secretary's visit to Chicago and he asked that a copy be sent
to him.
Upon hearing that the Secretary was going to appear at the
Navy Show on Saturday night, we received the following from F. M.
Knight, Chairman of the Cook County War Finance Committee:
"EVERYONE DELIGHTED THAT SECRETARY MORGENTHAU WILL BE WITH
US SATURDAY NIGHT. THIS ASSURES THE SUCCESS OF THE PARTY
AND THE BROADCAST."
Another message to the effect that:
"MR, WALTER CUMMINGS WILL BE VERY HAPPY TO HAVE THE
SECRETARY AT AN INFORMAL LUNCHEON WITH HIM AT THE BANK
THAT SATURDAY WITH A SMALL GUEST LIST TO INCLUDE HAP YOUNG,
FEDERAL RESERVE BANK, SHERER, WAR FINANCE COMMITTEE FOR
ILLINOIS AND SEVERAL SIXTH WAR LOAN COMMITTEE MEMBERS.
F. M. KNIGHT."
In addition, we have a teletype from Mr. Knight, Chairman of
the Cook County Committee saying:
"AS LONG AS THE SECRETARY IS GOING TO BE HERE FOR THE SHOW
WE WOULD LIKE VERY MUCH TO HAVE HIV APPEAR ON THE 9:45 PM
BOB HOPE BROADCAST. HIS APPEARANCE WOULD GIVE US THE PROPER
TIE-IN FOR THE LAUNCHING OF THE SIXTH WAR LOAN AND WOULD
HELP US MATERIALLY LOCALLY AS WE WILL HAVE 1500 ILLINOIS
LEADING INDUSTRIALISTS AND KEY WAR BOND WORKERS AS AN
AUDIENCE. PLEASE TRY TO GET HIM TO ACCEPT THIS INVITATION.
SHERER, KNIGHT AND COMMITTEE."
We have had two phone calls from Chicago relative to the
Secretary appearing on the Bob Hope program which is being produced
by Mr. Charles Luckman, President of the Pepsodent Company.
Regraded Unclassified
179
THE SECRETARY OF THE TREASURY
WASHINGTON
NOV. 4 1944
TO HEADS OF BUREAUS AND OFFICES,
TREASURY DEPARTMENT.
The Sixth War Loan will open on November 20, 1944,
and will continue through December 16.
Quotas for the various departments and agencies of
the Federal Government have been established at 35 per
cent of the gross pay roll (including overtime) for
September. Credit against quotas will be given for all
pay-roll deductions and extra cash purchases of bonds
from November 1 to December 31.
Attached is a statement setting forth the quotas for
the various bureaus and offices of the Treasury Depart-
ment. It is my earnest hope that each bureau and office
will meet or exceed the quota which has been established
for it.
The success of the Treasury Department in meeting
its quotas in previous War Loan Drives is due in large
measure to the personal interest and support of the heads
of the various bureaus and offices, as well as section
heads, supervisors, and others in key positions.
I am confident that, as in the past, your whole-
hearted cooperation and support will make the Sixth Mar
Loan an outstanding success.
Secretary of the Treasury
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AED
STAMPS
Regraded Unclassified
180
WAR BOND QUOTAS
SIXTH WAR LOAN
FOR EMPLOYEES OF THE
TREASURY DEPARTMENT
Est. Pay-roll
Number
Gross
Allotments
Net
of
Bureau or Office
Quote
(Nov. & Dec.)
Quota
Employees
Office of the Secretary
.....
$24,400
$16,015
$8,385
256
Division of Research and
Statistics
11,400
7.425
3,975
123
Office of General Counsel
13,800
10,300
3,500
127
Division of Personnel
6,150
4,175
1,975
82
Office of the Chief Clerk
10,420
6,750
3,670
169
Office of Superintendent
of Treasury Buildings
12,600
9,800
2,800
301
Bureau of Accounts
162,670
112,075
50,595
2,677
Bureau of Public Debt
486,750
330,830
155,920
8,599
Treasurer of the U. S.
142,400
77,800
64,600
2,714
Bureau of Customs
717,895
477,175
240,720
8,387
Comptroller of the Currency.
94,300
66,280
26,020
887
Bureau of Internal Revenue
3,563,090
2,303,925
1,259,165
46,105
Bureen of Narcotics
.........
29,135
18,255
10,880
295
Bureau of Engraving and
Printing
485,880
251,330
234,550
6,435
Secret Service
70,300
40,165
30,135
892
Bureau of the Mint
177,200
119,430
57,770
2,778
Procurement Division
398,335
232,745
165,590
5,571
Division of Monetary Research
7,430
4,700
2,730
66
Division of Tax Research
5,025
3,070
1,955
51
War Finance Division
162,900
96,790
66,110
1,822
Foreign Funds Control
40,800
27,525
13,275
525
Total
$6,622,880
$4,216,560
$2,406,320
88,862
Extra cash sales (or additional allotments)
over and above existing pay-roll allotments.
November 3. 1944
Regraded Unclassified
181
Regraded Unclassifi
NOV 4 1944
TO ALL EMPLOYEES OF THE TREASURY DEPARTMENT
The Sixth War Loan opens on November 20, and will rus to
December 16. However, all bond allotments and all extra cash
purchases from November 1 to December 31 will be credited against
quotas.
The quota for our department is $6,622,875. This is equivalent
to 35 per cent of a month's pay, including overtime.
I want you to know how greatly I appreciate your support
of the War Loans in the past. War bonds are not only a good in-
vestment for you, but you are investing in the future of your
country. Not only are you buying & share in America but you are
helping your country at a time when it needs your help most.
Those who think this war is nearly over are day-dreaming.
The road to Berlin is a great deal tougher than ve are sometimes
inclined to think after reading or hearing accounts of individual
victories.
And when the war in Europe is over we still have a tremendous
Job in the Pacific. The European war is expensive, but almost
everything in the Pacific var will cost more. Take transport costs,
for instance. Because of the longer distances, the same amount of
freight costs 25 per cent more when shipped to the South Pacific
than to Europe. And it takes twice as may cargo ships in the
Pacific to support a task force of a given eise since turnaround
time is twice as great!
In addition, we will need more of everything. More B-29
Superfortresses that cost $600,000 each. More P-47 Thunderbelts
that cost $50,000 each. More Malt Tanks, with bulldoser blades,
that cost $67,417 each. More amphibious tanks - more aircraft
carriers - more supply ships - more gasoline and oil than it took
for the invasion of Europe!
And lest anyone forget, ve will need more battalion aid stations-
more clearing stations - more evacuation hospitals - more convalor-
cent hospitals - more hospital ships.
For many, many years the sick, vounded, and otherwise disabled
veterans will require medical attention and dare. That's the least
Uncle San can do in appreciation of what they've done for us.
182
- 2 -
We still have an Army and Havy of 11 to 12 million men and
vomen to maintain. Whether the non are actually fighting or not,
they must be fed, housed, transported from one training center of
battle area to another, cared for in a hundred and one different
vays. That all cests money and will centinue to until the last
man demobilised 10 back in civilian clothes.
In addition, millions of dollars will be required for muster-
ing out pay. for various benefits and services voted by Congress
to help the boys get started in civilian life.
These are some of the reasons why the Government will continue
to need so much money even after the collapse of Germany. They
are also the reasons why patriotic Americans will want to buy
heavily during the Sixth Var Loan.
Let's all of us in the Treasury Department do our share!
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
EFBarteltihbw 11/3/44
Regraded Unclassified
182
- 2 -
We still have an Army and Havy of 11 to 12 million an and
vomen to maintain. Whether the sen are actually fighting or not,
they must be fed, housed, transported from one training center of
battle area to another, cared for in a hundred and one different
ways. That all cests money and will centinue to until the last
man demobilised is back in civilian clothes.
In addition, millions of dollars will be required for mister-
ing out pay. for various benefits and services voted by Congress
to help the boys get started in civilian life.
These are some of the reasons why the Government will continue
to need 90 much money even after the collapse of Germany. They
are also the reasons why patriotic Americans will want to buy
heavily during the Sixth Var Loan.
Let's all of us in the Treasury Department do our share!
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
EFBarteltihbw 11/3/44
Regraded Unclassified
1944 NOV 4 PM I 39
WU23 45
TDB BROOKLINE MASS NOV 4 1944 115P
H MORGENTHAU JR
SEC OF TREAS
THE BOSTON SYMPHONY ORCHESTRA AND I WILL WITH GREAT
PLEASURE COOPERATE WITH THE TREASURY DEPARTMENT IN A
SPECIAL CONCERT FOR THE SIXTH WAR LOAN CAMPAIGN AM
COMMUNICATING YOUR LETTER TO BOSTON SYMPHONY TRUSTEES AND
MANAGER TRUSTING A DATE CAN BE SECURED FOR THAT PURPOSE.
REGARDS
SERGE KOUSSEVITZKY.
138P.
Regraded Unclassified
184
x
November 4, 1944.
Dear Mr. Ninekley:
In the absence of the Secretary, I an
asknovledging your note of October 31,
which transmitted a copy of the first
quarterly report to Congress on Var Contract
Terminations and Settlements. I shall bring
your letter and the report to Mr. Morgenthau's
attention as seen as he is again in the
office, and meanwhile, I know he would wish
no to thank you for seeing that he received
a copy.
Sincerely yours,
(Signed) H.S. Klotz
C
R. S. nots,
Private Secretary.
Nemorable Robert 1. Ninekley,
Director, Office of Contract Settlement,
Federal Recerve Building,
Vashington 25, D. C.
GEF/dbs
Regraded Unclassified
105
OFFICE OF CONTRACT SETTLEMENT
FEDERAL RESERVE BUILDING
WASHINGTON 25, D.C.
DIRECTOR
October 31, 1944
The Honorable
Henry Morgenthau, Jr.
Secretary of the Treasury
Washington 25, D. C.
Dear Mr. Morgenthau:
Enclosed is a copy of the first
quarterly report to Congress, which was made today.
Sincerely yours,
Robert H. Hinckley
Enc.
Regraded Unclassifie
106
WAR CONTRACT TERMINATIONS
AND
SETTLEMENTS
REPORT OF
THE DIRECTOR OF CONTRACT SETTLEMENT
To THE CONGRESS
PURSUANT TO
THE CONTRACT SETTLEMENT ACT OF 1944
(PUBLIC LAW 395 - 78th CONGRESS)
OCTOBER 1944
Regraded Unclassified
187
WAR CONTRACT TERMINATIONS
and
SETTLEMENETS
CONTENTS
Section
Page
I. Summary
1
II. Contract Settlements to Date
3
III. Contract Settlements Ahead
7
IV. The Office of Contract Settlement
11
A. Predecessor Staff Organization: Joint Contract
11
Termination Board
B. Organization of the Office of Contract Settlement
12
C. Relations with Contracting Agencies
15
D. Relations with War Contracts
18
V. Regulations
21
A. Interim Financing - Regulations 1 and 2
21
1. Termination Loans
2. Partial Payments
B. Pretermination Settlement Agreements - Regulation 3
25
C. Plant Clearance - Regulation 4
25
D. Fair Compensation - Regulations 5, 6 and 7
26
E. Delegation - Regulation 6
27
F. Standard Settlement Proposal Forms - Regulation 8
28
VI.
Other Activities
31
A. Progress Reporting and Statistical Studies
31
B. Dissemination of Information
32
C. Training
34
D. Cost-Plus-A-Fixed-Fee Contracts
34
E. Company-wide Settlements
36
1. Direct Determination of Claims
-
and Property Disposition.
2. Local Coordinating Committees
F. Preservation of Records
36
G. Exemption of Foreign Contracts
37
I
Regraded Unclassified
APPENDIX A - ORGANIZATION
Exhibit
Page
I.
Organization Chart of the Office of Contract Settlement
l-a
II. List of Contracting Agencies
3-a
III. Activities of The Joint Contract Termination Board
5-a
IV. Organization of Major Contracting Agencies
15-a
A. War Department
15-a
B. Navy Department
19-a
C. Maritime Commission
21-a
D. Procurement Division - Treasury Department
23-a
E. Contractor Organization
23-a
APPENDIX B - REGULATIONS AND FORMS
Exhibit
Page
I.
Office of War Mobilization Directive Order 2 and Uniform
1-b
Termination Article for Fixed-Price Supply Contracts.
Subject: Uniform Termination Article
II. Office of War Mobilization Directive Order 3.
7-b
Subject: Pricing Policy on Termination Inventory
III. Office of War Mobilization Directive Order 4.
9-b
Subject: Interpretations of Uniform Termination Article
IV. Office of War Mobilization Directive Order 5.
11-b
Subject: Settlement Organization of Agencies
V.
Office of Contract Settlement Regulation 1.
17-b
Subject: Termination Loans
VI. Office of Contract Settlement Regulation 2 and Standard
33-b
Application for Partial Payment.
Subject: Partial Payments
VII. Office of Contract Settlement Regulation 3.
39-b
Subject: Pre-Termination Settlement Agreements
II
Regraded Unclassified
188
Appendi: B - Regulations and Forms Cont.
Exhibit
Page
VIII. Office of Contract Settlement Regulation 4.
41-b
Subject: Plant Clearance
IX. Office of Contract Settlement Regulation 5.
47-b
Subject: Cost Principles
X. Office of Contract Settlement Regulation 6.
51-b
Subject: Settlement of Subcontractors Claims
XI. Office of Contract Settlement Regulation 7.
59-b
Subject: Fair Compensation
XII. Office of Contract Settlement Regulation 8 and
69-b
Standard Settlement Proposal Forms.
Subject: Standard Settlement Proposals
XIII. Uniform Statistical Reporting Forms.
87-b
APPENDIX C - STATISTICAL TABLES
Table
Page
CONTRACTING AGENCY REPORTS
1-c
1.
TOTAL, ALL REPORTING AGENCIES - War Contract Termi-
3-c
nations and Settlements, Prime Contracts, Quarter Ending
September 30, 1944
2.
WAR DEPARTMENT - War Contract Terminations end Settle-
4-c
ments, Prime Contracts, Quarter Ending September 30, 1944.
3.
NAVY DEPARTMENT - War Contract Terminations and Settle-
5-c
ments, Prime Contracts, Quarter Ending September 30, 1944.
4.
MARITIME COMMISSION - War Contract Terminations and
6-c
Settlements, Prime Contracts, Quarter Ending September 30,
1944.
5.
PROCUREMENT DIVISION - TREASURY DEPARTMENT - War Contract
7-c
Terminations and Settlements, Prime Contracts, Quarter
Ending September 30, 1944.
6.
DEFENSE PLANT CORPORATION - RECONSTRUCTION FINANCE
8-c
CORPORATION - War Contract Terminations and Settlements,
Prime Contracts, Quarter Ending September 30, 1944.
III
Regraded Unclassified
Appendix C - Statistical Tables
Cont.
Table
Page
WAR PRODUCTION BOARD TABULATIONS
9-c
7.
NUMBER AND PERCENTAGE DISTRIBUTIONS FOR PRIME WAR CON-
11-c
TRACT TERMINATIONS, By Geographic Region and Major
Object, January - July 1944.
8.
CONTRACT PRICE OF ITEMS CANCELED AND PERCENTAGE DIS-
12-c
TRIBUTIONS FOR PRIME WAR CONTRACT TERMINATIONS, By
Geographic Region and Major Object, January - July 1944.
9.
PERCENTAGE DISTRIBUTION OF AMOUNT OF WAR SUPPLY CONTRACTS,
13-c
By Geographic Region and Status, Thru July 1944.
10, NUMBER, AMOUNT OF CLAIM, AND PERCENTAGE DISTRIBUTIONS
FOR PRIME FIXED-PRICE WAR CONTRACT. TERMINATION CLAIMS
14-c
SETTIED, by Size of Claim and Lapse of Time from Effective
Date of Termination, January- July 1944.
11. NUMBER, AMOUNT OF CLAIM, AND PERCENTAGE DISTRIBUTIONS
15-c
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATION CLAIMS PENDING,
by Size of Claim and Lapse of Time from Effective Date of
Termination, January- July 1944
12. NUMBER, AMOUNT OF CIAIM, AND PERCENTAGE DISTRIBUTIONS
16-c
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATIONS FILED,
by Size of Claim and Lapse of Time from Effective
Date of Termination to Filing Date of Claim, January-
July 1944.
13. NUMBER, AMOUNT OF CLAIM, AND PERCENTAGE DISTRIBUTIONS
17-c
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATION CLAIMS
SETTLED, by Size of Claim and Lapse of Time from Filing
Date to Settlement Date, January - July 1944.
14. NUMBER OF PRIME FIXED-PRICE WAR CONTRACT TERMINATION
18-c
CLAIMS SETTLED, by Size of Claim, Number of Subcontractors'
Claims Submitted, and Lapse of Time from Effective Date to
Settlement Date, January - July 1944.
15. NUMBER AND PERCENT OF SETTLED PRIME CONTRACTOR CLAIMS
19-c
REQUIRING 6 MONTHS OR MORE FOR SETTLEMENT, By Size of
Claim and Number of Subcontractor Claims, January -
July 1944.
IV
Regraded Unclassified
189
Appendix C - Statistical Tables ... Cont.
Table
Page
16. SUBCONTRACTORS' SETTLEMENTS AS RELATED TO PRIME CON-
20-c
TRACTORS' SETTLEMENTS, by Size of Claim, January - July
1944.
17. NUMBER AND PERCENTAGE DISTRIBUTIONS OF COMPANIES HAVING
21-c
PRIME CONTRACT TERMINATIONS, by Number of Terminations
per Company and Total Contract Price of Items Canceled
per Company, January - July 1944.
V
Regraded Unclassified
190
I. SUMMARY
1. To date, items valued at 21 billion dollars and involving
37,000 prime contracts have been canceled by the War and Navy Departments
and the Maritime Commission. These cancellations have occurred while pro-
duction was being brought to a peak and maintained. Therefore, they repre-
sent a transfer of manpower and facilities from one type of war production
to another. The value of terminations for all agencies 1s only 7% of the
overall war program commitments of 325 billion dollars, 240 billion dollars
of which have already been produced.
2. V-E Day will bring terminations exceeding 20 billion dollars,
most of which will come within three months, according to the best avail-
able estimates. This represents at least one third of the outstanding war
production program and equals approximately all terminations to date. V-E
Day cutbacks will release manpower and productive facilities from war pro-
duction for other uses. Prompt settlement of terminated contracts will
speed the shift to civilian production.
3. Experience with contract settlement shows that the challenge
of mass terminations can be met. The War and Navy Departments and the
Maritime Commission have already settled 28,000 terminations; these in-
volved items valued at 9 billion dollars and were settled by payment of
340 million dollars. Recently, the average time required for settlement
has been reduced considerably and some operating units are now able to
settle all but a few large claims well within six months after termination.
It 18 clear, therefore, that conversion from war to peacetime production
need not be delayed by contract settlement, particularly when adequate
financing and prompt plant clearance 18 provided pending settlements of
claims.
- 1 -
Regraded Unclassified
4. Many steps to meet the need for speedy and fair settlement
have already been taken. Since terminations began, the contracting
agencies have established and improved organizations, procedures and
policies for carrying on their contract settlement activities, The Joint
Contract Termination Board developed uniform termination articles and a
60-day plant clearance policy. After months of deliberation and considera-
tion by Congress, the Contract Settlement Act of 1944 was passed, providing
8 comprehensive statutory basis for the solution of contract settlement
problems. The Office of Contract Settlement has issued regulations cover-
1ng interim financing, pre-termination settlement agreements, removel of
government owned plant equipment, fair compensation, delegation of au-
thority to contractors to settle certain emall net claims, and uniform
settlement proposal forms. The work to date has provided policies, pro-
cedures and operating organizations by which terminated war contracts
can be settled, but much still remains to be done.
5. The immediate taske ahead are to expand and improve the
operating unite and to perfect present policies and procedures. Addi-
tional agency and contractor personnel must be trained by the contract-
ing agencies. Contractors, especially the large prime contractors, must
assume a larger share of the responsibility for getting the necessary
information to their subcontractors. Special problems such as cost-plus-
a-fixed-fee contracts, company-wide settlement, direct settlement, and
speedier settlement of the claims of subcontractors demand immediate atten-
tion. To meet the situation, cooperative efforts of the Office of Contract
Settlement, the contracting agencies and the contractors will be required.
- 2 -
Regraded Unclassified
191
II. CONTRACT SETTLEMENTS TO DATE
In the period July 1940 to date, this country entered upon 8
war program which required the commitment of more than 325 billion dollars
and resulted in the production of war goods and services totaling 240
billion dollars.
During this same period the War and Navy Departments and the
Maritime Commission terminated 37,000 contracts. The value of items can-
celed by these terminations was 21 billion dollars. Of the 37,000 contract
terminations, 28,000 have already been settled covering 9 billion dollars
of the 21 billion dollars canceled. The terminations settled required
payments of 340 million dollars. Currently, the two military services
and the Maritime Commission have 9,000 terminations pending settlement.
The contract price of the items canceled in these pending cases totals
12 billion dollars.
Information from other contracting agencies (Treasury Department
and the Reconstruction Finance Corporation) shows a large number of termi-
nations but for relatively small amounts. These terminations aggregate
some 79,000 and involve canceled commitments of 570 million dollars. Over
98 percent of them in number, involving canceled commitments of 448 million
dollars, have already been settled by payments totaling 7 million dollars.
The terminations effected to date have been made while war pro-
duction has been increasing or maintained at its maximum level. These
terminations adjusted the war production program to changing needs but did
not decrease it. While terminations of all agencies totaling over 22
billion dollars are large in absolute amounts, they represent an adjust-
ment of only 7% in the total war program. Furthermore, these cancella-
tions made possible the placing of other orders for types of munitions
- 3 -
Regraded Unclassified
and equipment better euited to the military Job. To date, these adjust-
ments have involved payments of slightly less than 4% of the contract
price of the items cenceled.
The size of the terminations and the progress made in settle-
ment vary considerably among the three principal contracting agencies --
War, Navy, and Maritime Commission. Terminations, 88 a result of the
progress of the war, became a major problem for the War Department at an
earlier date than for the Navy Department and the Maritime Commission.
Of the 37,000 terminations by the three agencies, approximately 30,000
are War Department terminations. Similarly, of the 21 billion dollars
canceled, 17 billion dollars are War Department cancellations. Since the
War Department's terminations came earlier, it has had longer experience
in meeting the problems of settlement. Currently, the War Department has
settled 86% of the total number of ite terminations, the Navy Department
47%, and the Maritime Commission 19%. The disparity in performance is
somewhat less than these percentages indicate since the Navy Department
and Maritime Commission have had no volume of terminations until recently.
But this in no way detracte from the accomplishmente of the War Department.
One of the most difficult problems in settlement arises from the
structure of the contracting relationship. In the vast majority of cases,
the contracting agencies settle only with their prime contractors. These
prime contractors in turn must settle with those with whom they have sub-
contracts and BO on down the line. To achieve speed and equity in the
settlement of subcontractors' claims is a major taek of the Office of
Contract Settlement and the contracting agencies. There are considerable
difficulties in passing policy end information down the contractual chain
- 4 -
Regraded Unclassified
192
and in securing the speedy transmission of subcontractors' claims as they
move up the chain to the contracting agency. The development of proper
policies and methods to facilitate the settlement of subcontractors' claims
is difficult because of the intervening contractual relationships.
- 5 -
Regraded Unclassified
183
III. CONTRACT SETTLEMENTS AHEAD
The effect of the termination and settlement problem upon the
total economy in the year 1945 will be extremely important and will re-
quire quick and effective action. The preparation for this task must be
undertaken on the basis of the best available information.
Currently, the War Production Board estimates that there are
outstanding contracts for 65 billion dollars of goods yet to be delivered.
More than 99% of this 65 billion dollars is contained in 45,000 outstand-
ing contracts having a value of $10,000 or over. The War Production Board
further estimates that should hostilities continue on the present scale
throughout the year the number and value of outstanding contracts as of
December 31, 1944 should show no substantial change from present levels.
If V-E Day comes before the end of the year, the War Production
Board believes that the average rate of munitions production, in the next
12 months, will be about 32% below the rate of production during the third
quarter of 1944, and that the greater part of the total V-E Day cutbacks
will be taken in the first three months following. The War Production
Board estimates that these outbacks would reduce, in three months, the
number of outstanding contracts of $10,000 and over from 45,000 to 30,000,
and the undelivered value of such contracts from 65 billion dollars to
45 billion dollars. About 100,000 companies are involved in the produc-
tion of the 65 billion dollars worth of undelivered items. About 15,000
of these companies hold prime contracts of $50,000 and over; an additional
5,000 hold prime contracts from $10,000 to $50,000; and 80,000 hold con-
tracts of less than $10,000 or subcontracts only. Approximately 85 percent
of the 65 billion dollars in outstanding prime contracts 1s held by 100
- 7 -
Regraded Unclassified
corporations and their subsidiaries. Ten corporations and their sub-
sidiaries hold 45 percent of the 65 billion dollare of undelivered value
of outstanding prime contracts.
In the year 1944 to date, with war production being maintained,
terminations were taking place at about 1 billion dollare per month, with
some 2,500 prime contracts being terminated per month by the military
agencies and the Maritime Commission collectively. Some such rate will
probably prevail (independent of V-E Day cutbacks) during the months
following V-E Day. The burden of major cutbacks will, in this way, be
added to by program adjustments which are
inevitable part of any con-
tinuing war program, even though the general level of that program remains
constant.
If V-E Day does not arrive before the end of 1944, but should
come in the early part of 1945, the general magnitude of V-E Day cutbacks
would probably be the same. However, they would be more gradually intro-
duced and less concentrated in the first quarter following V-E Day.
The speedy settlement of terminations is clearly a big job.
Policies and regulations must be established and issued. The internal
organizations of both Government and business must be adjusted and person-
nel trained to do the job.
Speedy and equitable settlement of war contract terminations is
a critically important step in starting industry toward reconversion for
full employment in peace. The prompt settling of war contracts will allow
private industry to devote its full energy and initiative to the rebuild-
ing of peacetime production. The settling of terminations does not, of
course, provide the complete solution to the adjustment of production to
the lessened war requirements, but it is one of the first essentials to
o
- 8 -
Regraded Unclassified
194
the solution of that problem. Other agencies of the Government working
cooperatively with labor and industry must take many other steps to adjust
war controls. These will make possible the speedy resumption of civilian
production, not in conflict with the continuing war effort.
- 9 -
Regraded Unclassified
195
IV. THE OFFICE OF CONTRACT SETTLEMENT
A. Predecessor Staff Organization: Joint Contract Termination Board
The Office of Contract Settlement is 8 continuation, on a
statutory basis, of the Joint Contract Termination Board which had pre-
viously been set up in the Office of War Mobilization. This Board was
formed on November 12, 1943 as the result of a growing conviction on the
part of the contracting agencies and the Office of War Mobilization that
& means had to be found for developing uniformity in termination settle-
ment procedures. The Board originally included the six major procuring
agencies (War Department, Navy Department, Maritime Commission, Treasury
Department, Reconstruction Finance Corporation, and Foregin Economic
Administration) and was later expanded by the addition of representatives
of the War Production Board, Smaller War Plants Corporation, and the
Department of Justice. It acted under the chairmanship of Mr. John M.
Hancock and the agreements which it reached on policies were effectuated
by directives of the Office of War Mobilization.
The Board functioned through subcommittees representative of
the member agencies, which developed drafts of policies and laid them
before the Board for approval. In this way, important steps in the direc-
tion of uniform procedures were taken. A uniform termination article for
fixed-price prime supply contracts and an accompanying statement of prin-
ciples for determining costs were developed and announced. A termination
article for use in subcontracts was recommended to contractors. The policy
was developed of clearing contractors' plants of, termination inventory
within sixty days after a request. Policies were also established govern-
ing the types of organization which should be maintained by the contracting
- 11 -
Regraded Unclassified
agencies to make termination settlements and governing the extent to which
such settlements should be reviewed within the agencies.
The Board was also the means of coordinating the views of the
contracting agencies on the many policy questions regarding the Contract
Settlement Act which arose while it was being debated in Congress. In
addition, it initiated consideration of a number of other matters, on
which action is being taken by the Office of Contract Settlement. A
fuller review of the activities of the Board, prepared by its Chairman,
appears as Appendix A, Exhibit III.
B. Organization of the Office of Contract Settlement
The Contract Settlement Act of 1944 became effective on July 21,
1944, and on October 3, 1944 the Office of Contract Settlement was made
a part of the Office of War Mobilization and Reconversion by Public Law
458. On July 28 the Director of Contract Settlement was appointed and
assumed his duties under the Act.
A first step of the Director was to provide for the continuance
of the work which the Joint Contract Termination Board had under way. A
second step was to establish an organization adequate to perform the tasks
prescribed by the Act.
The organization adopted was based on the direction of the Act
to utilize "the personnel and facilities of the contracting agencies and
other established Government agencies" to the maximum extent feasible.
Thus only a small organization, easily expansible if necessary, was
planned. This made it essential to have a staff consisting of persons
of maturity and experience. Only in this way could the facilities of other
agencies be used effectively and the knowledge and experience of those
agencies be brought to bear upon the problems of this office.
- 12 -
Regraded Unclassified
186
The office was organized into nine major unite in addition to
the Contract Settlement Advisory Board and the Appeal Board. For the most
part, responsibilities assigned to these unite represent those imposed upon
the Director by specific sections of the Act itself, as follows:
Terminations
- Sections 6, 7, 11, 17
Plant Clearance
- Section 12
Interim Financing
- Sections 8, 9, 10
Training
- Section 21(a)
Progress & Statistics
- Sections 18(b), 2(b) (in part)
Public Information
- Section 2(b) (in part)
Accounting
- Staff
Organization and Procedures
- Staff
General Counsel
- Staff
An organization chart is shown in Appendix A, Exhibit I.
For successful operation the office required a mechanism for
effectively cooperating with the contracting agencies. This was done
through a system of advisory committees of the Contract Settlement Ad-
visory Board, similar to that of the Joint Contract Termination Board.
These standing committees generally parallel organizational unite of the
Office of Contract Settlement. Special committees may be established
for particular problems. Each committee is established by the Director
who names a chairman from his own staff and asks each agency on the Ad-
visory Board to designate a member. In some instances agencies not on
the Advisory Board are asked to designate representatives or consultants
when this will facilitate coordination between the Office of Contract
Settlement and other agencies or bring special knowledge to the committee.
The committees already established are:
Committee on Termination Accounting; Committee on Financing;
Committee on Terminations, Committee on Property and Plant Clearance;
Committee OD Legal Questionery Committee on Progress Reporting and
Statistics; Committee on Organization and Procedures, Committee on
- 13 -
Regraded Unclassified
special
Training; Committee on Public Information and, Committee on Preservation
of Records.
Among the first problems considered was the appointment of an
Appeal Board 88 required by Section 13(d)(1) of the Act. Under the Act
there are two primary sources of appeals to this Board; settlements by
determination, the BO called formula settlements, under Section 13, and
disputes between contractors and contracting agencies under Section 17.
No cases under Section 17 have BO far been brought. A survey
was made of the number of formula settlements in process. It was found
that only three such caBeB were now pending in the War and Navy Depart-
ments and the Maritime Commission. From such information it will be
possible to estimate the future maximum case load of the Board and thus
to staff it in advance in ample time to meet its responsibilities.
In view of the minimum size of the present case load, it has
been determined to appoint immediately to the Board one man of national
stature, to devote full time to its work; and to appoint to it temporarily
two members of the staff of this Office, who will be supplanted, as soon
88 the work load justifies, by other full time members. Thue the plan is
to create an Appeal Board wholly independent of the staff of this Office
88 soon as there is enough work for it.
The agencies on the Advisory Board, 88 well as others, but par-
ticularly the major procurement agencies, have been extremely generous
in the assistance given this office since ite inception. Both personnel
and services requested by this office have been promptly provided. Staff
members of the Bureau of the Budget have been very helpful to this office
in gathering information as to the organization and operation of contract-
ing agencies.
- 14
Unclassified
197
Without the help of all of these agencies, the accomplishments
of the office would certainly have been much less. It will be necessary
to continue to call on these agencies for assistance. The staff 1s not
yet complete. Recruitment to date has been difficult and there is every
reason to expect it will continue to be so.
C. Relations With Contracting Agencies
There are 28 contracting agencies which may have war contracts
potentially subject to the Contract Settlement Act of 1944. However,
five of these have almost all of the job of terminating and settling war
contracts. These are the War Department, Navy Department, Maritime Com-
mission, Treasury Department, and Reconstruction Finance Corporation with
its subsidiary corporations. A full list of the contracting agencies 18
shown in Appendix A, Exhibit II and a brief description of the organiza-
tion of the major contracting agencies 1s provided in Appendix A, Ex-
IV
hibit H.
The task of the Director 1e to achieve the objectives of the
Act by controlling and supervising the contract settlement work of the
contracting agencies. The principal means of doing this 1s the Director's
authority to prescribe the policies, principles, methods, procedures and
standards for contracting agencies and to require or restrict the use by
such agencies of authority and discretion under the Act.
Subject to the supervision and control of this Office, the con-
tracting agencies likewise are responsible for carrying out the Act's ob-
jectives. Contracting agencies do the Government's actual work of termi-
nating contracts and settling claims. It 18 the contracting agency which
- 15 -
Regraded Unclassified
issues the termination notice. It is the contracting agency to which claims
are presented. It is the contracting agency which arranges for the storage
and removal of inventories and equipment. It 18 the contracting agency
which makes final settlement of claims. Except for the delegation of work
to contractors and the carrying of appeals beyond the contracting agencies,
all contract settlement operations are carried out by the contracting
agencies.
Action by the Director on matters of major policy has been taken
only after full discussion among the agencies. This is done mainly through
the Contract Settlement Advisory Board and its system of committees men-
tioned earlier and through close day-to-day working arrangements. Thus,
this Office obtains a thorough knowledge and understanding of problems
before taking action. The result is speed and uniformity in effectuating
decisions once made.
An example of how this works 18 the development of uniform forms
for the presentation of settlement proposals for terminated fixed price
war supply contracts. Prior to the appointment of the Director, a sub-
committee of the Joint Contract Termination Board composed of representa-
tives from the War Department, Navy Department, Maritime Commission,
Foreign Economic Administration and Reconstruction Finance Corporation,
had been working cooperatively with a subcommittee of businessmen of the
Advisory Committee to the Bureau of the Budget on Government question-
naires. This arrangement was continued but with the additional partici-
pation of the Office of Contract Settlement in the discussions and develop-
ment of the forms. The committee was unanimous in its recommendations to
the Director that they be approved. The Director accepted the recommenda-
tions and issued the forms as Regulation 8.
- 16 -
Regraded Unclassified
198
Working arrangements with the agencies, however, go beyond joint
consideration of proposed actions of the Director. Important actions which
the agencies proposed to take on their own responsibility have been referred
to the Director for his views and comments. In this way the Director has
been able to achieve results without delaying action. An outstanding ex-
ample is the new joint Army-Navy regulation for contract settlement. This
regulation--which had been in the process of discussion and preparation
by the Army and Navy for some time--was submitted to the Director for com-
ment. As a result, changes were made on a number of points.
Successful supervision and control requires more than coopera-
tive joint deliberation and action. Accurate and prompt knowledge
of operations and results is also essential. This 1e recognized by the
Act which provides for flexibility in the manner in which information can
be obtained.
More than one procedure will have to be used to provide the in-
formation required by the Director. Plans of the Office call for a three-
fold program of reports, studies and investigations of operations and
results.
First, there are to be statistical reports and studies. The
basic recurrent reports--three of which already are in effect--will cover
the status of terminations, claims, settlements, interim financing, plant
clearance, and other subjects. These recurrent reports will be supple-
mented by special statistical studies, two of which are now in progress.
It is planned to use the facilities of the existing agencies to do most
of the work involved in the statistical reports and studies.
Second, steps will be taken to make sure that adequate organiza-
tion and procedures for handling, reviewing and checking settlements,
- 17 -
Regraded Unclassified
interim financing and plant clearance are in effect. Conferences are now
being held with representatives of the contracting agencies for this pur-
pose and to determine what further measures need to be taken.
Third, from time to time, as information from contractors, the
agencies, or other sources indicate a need for them, special studies will
be made or special reports developed on particular phases of contract
settlement.
The information from and about the contracting agencies de-
veloped under this program, together with the information from other
sources, will provide the basie for decision and action by the Director.
It is believed that most of this information 18 required in any case by the
various agencies for their own effective administration. Hence, to give
the information necessary for the satisfactory discharge of the Director's
responsibilities will place little, if any, additional burden upon the
agencies.
D. Relations with War Contractors
With regard to the actual termination and settlement of indi-
vidual contracts, the relation of the Office of Contract Settlement to
the contractor, other than through the Appeal Board, 18 indirect. The
Office settles no contracts; it takes no action on individual termina-
tions and claims. To obtain settlement of a terminated contract, the
war contractor deals with the contracting agency.
But, even though the office does not deal with contractors in
the settlement of individual claims, contractors have felt entirely free
to discuss their problems with representatives of this office and to in-
vite them to participate in discussions in committees of trade groups.
- 18 -
Regraded Unclassified
199
The problems and views of war contractore have been and must
continue to be available to the Office of Contract Settlement. It is
constantly securing invaluable advice from qualified representatives of
industry and of professional groups on particular questions as they arise.
This Office is also exploring the desirability of creating a formal ad-
visory committee to assist in maintaining intimate contact with all as-
pects of settlement problems. In addition, it is planning to use other
means of obtaining the views of those interested in contract settlement.
- 19 -
Regraded Unclassified
V. REGULATIONS
200
A. interim Financing - Regulations 1 and 2.
The Director has prescribed two alternative plans of interim
financing pursuant to Sections 8, 9, and 10 of the Contract Settlement
Act. They are the guaranteed termination loan plan and the partial pay-
ment plan.
1. Termination Loans. On August 18, 1944, the Director of
Contract Settlement issued Regulation 1, (Appendix B, Exhibit V), author-
izing the War Department, the Navy Department, and the Maritime Commission
to guarantee loans made to finance termination claims. These T-Loans are
made by private banks and guaranteed by the Federal Reserve Banks as fie-
cal agents for the contracting agency having the preponderant interest
in the contractor's war production. They are available to all types of
contractors and are especially appropriate (a) for prime contractors who
have a large number of terminations, and (b) for lower tier subcontractors.
Commitments for such loans may be obtained in advance of termination, thus
facilitating prompt and speedy financing immediately upon cancellation of
a war contract.
A standard form of loan agreement has been issued in order to
discourage the imposition of burdensome conditions and restrictions. The
lending bank may edd conditions, but only if they are "not unreasonable
and not inconsistent with the standard loan agreement." Any such added
conditions must be set forth in 8 separate schedule for the examination
of the Federal Reserve Bank and the contracting agency. If examination
shows them to be inappropriate, their elimination may be requested ae a
condition of the guarantee.
21
Regraded Unclassified
The basic principle of T-Loan financing ie certificate borrow-
ing. Loans are based on the contractor's certification as to his invest-
ment in canceled contracts. Through this medium, the contractor is enabled
to convert to cash a high percentage of his over-all termination claims
pending final settlement. Under this type of loan, the borrower agrees to
essign to the lending bank moneys due and to become due on his war con-
tracts. The borrowing base is an agreed percentage of the contractor's
terminated contracts including accounts receivable, reimbursable inventory
costs, and reimbursable subcontract settlements which have been paid or
are simultaneously to be paid. T-Loans are available in connection with
partial 88 well as complete terminations. In virtually every case, the
borrower must maintain customary insurance coverage on his property. If
his credit rating is weak, the lending bank may require a mortgage of the
inventory attributable to the assigned contract.
The Board of Governors of the Federal Reserve Bank has formally
inaugurated the T-Loan program. The schedules of guarantee and commitment
fees have been announced. Where 80% or less of the T-Loan is guaranteed,
the bank pays the Government 10% of the interest payable by the borrower
on the guaranteed portion of the loan. If over 95% of the loan ie guar-
anteed, the bank must pay the Government 50% of the interest on the guar-
anteed portion. Banks cannot charge the borrower interest at a rate
higher than 41% per annum. The maximum commitment fee 18 1/4 of 1% per
annum or in the alternative, a flat fee of not more than $50.
2. Partial Payments. General Regulation No. 2, (Appendix B, Ex-
hibit VI) issued by the Office of Contract Settlement on September 8,
1944, sets up two principal types of partial payments: (a) partial
- 22 -
Regraded Unclassified
201
payments based on estimates submitted by the contractor; and (b) partial
neyments besed upon accounting data ehowing the contractor's costs. When
the situation requires, either type may be channeled through a controlled
account. A single standard application form has been approved by the
Director.
Subcontrectors, 86 well as prime contractors, are eligible for
these Dayments. AE 8 general rule, subcontractors muet apply through
their customers, who may be prime contractors or higher tier subcontractors.
The customer checks the application to determine whether it is reasonable
and allocable to government work and transmits it up the contract chain.
After approval, the contracting agency draws a check to the prime con-
tractor vho DUEBES the payment on down the contract chain. The Office of
Contract Settlement and the contracting agencies are working on procedural
modificatione which will cut to a minimum the complications of this process.
Particular provision was made for the possibility that the prime
contractor or some intervening subcontractor may be unable to Dase the
money on to the applicant for some reason such as insolvency. In this
situation, the contracting agency may utilize the controlled account pro-
cedure, or in special cases, may make partial paymente directly to the
subcontractor. Direct application for partial payments may be made by
subcontrectors where the usual procedure would result in unwerranted
delay.
Any war contractor in sound business condition may obtain im-
mediate partial Deyment of at least 755 of the contract price of unde-
livered completed erticles, plus 75% of his estimated coste of raw mate-
rials, purchased parts, supplies, direct labor and overhead allocable to
23
Regraded Unclassified
the terminated portion of his contract. Larger sums not in excess of 90%
of the cost certified to be due in the application may be advanced if the
contracting agency believes the request to be reasonable. Furthermore,
as a general rule the contracting agency will look entirely to the infor-
mation contained in the contractor's application in determining the amount
of the advance. To discourage contractors from over-estimating claims,
the amount of any overpayment 18 subject to a' 6% penalty; and in addition,
any overpayment is treated as a loan carrying a penalty of 6% per annum.
Contractors are encouraged to estimate in advance of actual ter-
mination what partial payments they will require.
Cost-supported partial payments may also be made. Items com-
pleted prior to termination, or completed thereafter with approval, are
paid for at the full contract price as soon as they are inspected and
accepted. In addition, the contractor 18 paid 90% of the cost of raw
materials, purchased parts, supplies, direct labor, and manufacturing
overhead allocable to the terminated portion of the contract as soon as
he supports them by substantial accounting data. These cost-supported
advances may also include a reasonable percentage of other allocable
costs, such as edministrative overhead. Additional amounts may be paid
if necessary, but total payments may not exceed the amount which the con-
tracting agency believes to be due by reason of the termination.
Controlled partial payments will be made if a contractor is
insolvent or in imminent danger of insolvency. The immediate or cost-
supported partial payment will be deposited in a special account, and
released under the supervision of a representative of the contracting
agency.
- 24 -
Regraded Unclassified
202
B. Settlement Agreements - Regulation 3.
Regulation No. 3 (Appendix B, Exhibit VI1) of the Office of
Contract Settlement authorized the contracting agencies to make pretermi-
nation settlement egreements. These agreements, made before termination,
may cover one or more of the elements in the claim that would otherwise
have to be settled after termination. They must be based on data which
permit reasonable forecasts, consistent with sound commercial standards,
of the factors involved.
Pretermination agreements provide a means for- shortening the
time between termination and settlement. They may cover such items 88
unit costs of termination inventories at various stages, unit prices
at which the contractor is to retain selected inventories, inventory
items to be scrapped, and overhead rates. By agreeing, when possible,
upon such items prior to termination, settlement plant clearance, and
financing is expedited. For example, it may permit immediate use or
disposition of inventories by the contractor rather than delay in the
use.or disposition pending agreement after termination.
Similar principles can be applied in agreements between prime
contractors and subcontractors, or between subcontractors, which will
be binding on the contracting agency when it approves them.
C. Plant Clearance - Regulation 4.
The policies of the Joint Contra to Termination Board end later
the provisions of the Contract Settlement Act deal apecifically with most
of the problems of plant clearance. Removal of government owned plant
equipment, however, is not covered by the Act in this we]. In many cases
this squirment 18 ocvered by contracts which require its maintenance in
stendby condition after the contract in terminated. Regulation 4
XY I
Regraded Unclassified
(Appendix B, Exhibit VIII) directs that unless the national defense re-
quires otherwise, these standby provisions will be waived.
The regulation gives contractors the right to bid first on equip-
ment in their plants and directs that the government act promptly on these
bids. It gives both prime contractors and subcontractors the first call
on equipment they may need for their peacetime production. To alleviate
the tremendous storage problem facing the contracting agencies after
V-E Day, the regulation urges contractors wherever possible to store un-
wanted equipment under agreement with the contracting agency. But a con-
ha
tractor neither wants to purcahse the equipment nor is able to store it,
the regulation requires its removal by the contracting agency within 60
days.
A further regulation is in preparation, covering aspects of
plant clearance that are not specifically dealt with by the Act. Among
these, is the right of subcontractore to make their request for plant
clearance directly to the contracting agency.
D. Fair Compensation - Regulations 5, 6, and 7.
Prior to the passage of the Contract Settlement Act, the
Office of War Mobilization had issued a uniform termination article for
use in prime contracts accompanied by a statement of principles for deter-
mination of costs. It had also recommended 8. substantially similar but
briefer termination article for use in subcontracts.
Experience with the statement of cost principles disclosed the
necessity for two amendments. These are made by Regulation 5 of the
Affice of Contract Settlement which appears as Appendix B, Exhibit IX.
The effect of the first of these amendments is to eliminate 8 provision
which had the effect of tying together renogotiation and contract
- 26 -
Regraded Unclassified
203
settlement. Similarly, the effect of the second is to eliminate from con-
tract settlement any consideration of the tax base of special facilities
owned by the contractor.
Regulation 6 (Appendix B, Exhibit x) makes certain amendments in
the recommended subcontract article and in the accompanying statement of
policy regarding the settlement of subcontracts. It makes clear that the
profit provisions of the subcontract article are the same as those of the
prime contract article. It also announces that pretermination settlement
agreements are applicable to subcontracts to the same extent as to
prime contracts. Finally it makes certain changes BO that the subcon-
tracte in which the subcontract article may be used will be those speci-
fied by the Act.
Regulation 7 (Appendix B, Exhibit XI) embodies a determination
by the Director that the provisions of the prime contract termination
article, as amended, and the subcontract termination article, as amended,
covering formula settlements afford fair compensation within the meaning
of the Act. This regulation also establishes the standards to guide the
negotiation of settlements by agreement, both under these articles and
under contracts not containing them. These standards permit flexible
negotiations on the basis of sound business principlea under the regu-
lation, negotiations may take into account the elements recognized in a
formula settlement, but they need not do BO. Operations under this regula-
tion will be reviewed from time to time, and any changes will be made
which experience showe to be necessary.
E. Delegation - Regulation 6.
In regulation 6, paragraph 3, the Director acted to simplify
and speed up payment for a vast number of small subcontractors. It
- 27 -
Regraded Unclassified
delegates to all wer contractors authority to settle finally termination
claims for less than $1,000, where the subcontractor retains or disposes
of all termination inventory, except in cases where the authority is
specifically withdrawn. Contracting agencies are directed to recognize
these subcontract settlements as final and conclusive for the purpose of
settling the terminated prime contracts to the extent allocable. The
public interest is protected by a provision that the settlement must be
made in good faith.
This in no way effects the contracting agencies' existing
practice of delegating to prime and intermediate subcontractors authority
to settle claims of $10,000 or less where review procedures have been
examined and approved.
P. Standard Settlement Proposal Forms - Regulation 8.
The Office of Contract Settlement has provided uniform settle-
ment proposal forms for use in settling claims connected with terminated
ixed price supply contracts and subcontracts, and has issued detailed
instructions for their use. Regulation 8, (Appendix B, Exhibit XII)
issued on October 18, makes these forms mandatory for all contracting
agencies. The forms do not apply to cost-plus-a-fixed-fee prime con-
tracts or subcontracts, but they must be used in preparing claims on
terminated fixed-price subcontracts underlying such agreements.
War contractors at any level in the contract chain will now
use thie single set of standard forms. Previously a number of forms were
in use. It 18 to be expected that issuance of the new forms will result
in a more uniform and efficient presentation of claims. This should be
reflected in a reduction of the average time necessary to file and proc-
688 a claim.
- 28 - -
Regraded Unclassified
Proposals prepared on the inventory basis are submitted on
204
Form 1. If the inventory basis cannot be used, Form lb is available for
the presentation of proposals on the total cost basis. These two forms
are for general use, unrestricted by the amount of the settlement. Form la
may be used for proposals involving less than 1000 in which the contractor
is willing to retain or dispose of all inventory. The importance of this
form cannot be overemphasized. By its use, many small prime contractors
and subcontractors will receive payment of their termination claims more
quickly and with a minimum of clerical work.
The inventory schedules give a contractor an option of simply
listing his inventory for settlement purposes or of classifying it and
describing it in detail if he calls upon the government to remove it.
Thus contractors can submit their inventory disposal schedules before,
with or after their settlement proposals.
Regraded Unclassified
VI. OTHER ACTIVITIES
205
A. Progress Reporting and Statistical Studies
One of the first steps of the Office of Contract Settlement was
to arrange with the contracting agencies for the development of reporting
systems which would provide adequate and comparable information. While
considerable data were available on contract terminations and settlements,
particularly in the War Department, no method of collecting the informa-
tion so that it could be assembled on a comparable basis for all the impor-
tant contracting agencies had been developed. In specifying uniform re-
ports for all contracting agencies every attempt was made to utilize
existing reports, particularly those used by agencies with well-developed
reporting systems. The information requested was the type that would be
helpful not only to the Office of Contract Settlement in analyzing the
progress of settlements, but also to the contracting agencies themselves.
The first uniform system of reporting which was developed covered
information on contract terminations and settlements. The reporting forms
being used are presented in Appendix B, Exhibit XIII. Tables 1 through 6,
Appendix c, are based upon the first reporting form OCS-R1. The other
raporting forms, OCS-R2 and OCS-R3 (Appendix B, Exhibit XIII) will provide
information, beginning with the month of October, on the speed of settlements.
Currently, arrangements are being made for the establishment of
comparable reports on interim financing and plant clearance. These reports
will show the extent of interim financing and the promptness of plant clear-
ances.
In addition to the regular reports such as those above, the Office
of Contract Settlement will make special studies. Presently, studies
RE
being
formulated to determine the speed with which subcontractors are being paid
and also the speed with which they are being financed prior to final payment.
- 31 -
Regraded Unclassifie
B. Dissemination of Information
Success in meeting the problems of contract settlement depends
not only on Un government's ability to do its share but also on the ability
of war contractors to do their part of the task. The important job 1e get-
ting information to contractors through the contracting agencies, estab-
lished channels of communication, organized groups and direct contacts.
To meet this need the Office of Contract Settlement 1e distri-
buting copies of its regulations to contracting agencies, contractors,
national trade associations and interested individuals. The main part
of the distribution of the Standard Forms has been assumed by the War and
Navy Departments, Smaller War Plants Corporation and other contracting
agencies BO that these forms are now reaching contractors through the
local offices of contracting agencies.
The American Bankers Association in collaboration with the
Office of Contract Settlement has launched an extensive educational
program involving nation-wide regional meetings of bankers. The Credit
Policy Commission of the Association has printed and distributed a book-
let on T-loans which includes Regulation 1 and complete explanations
designed to assist bankers in handling such loans. The program 18
reaching most of the 15,000 bankers of the country. A companion booklet
designed for war contractors, giving complete details on how to obtain
partial payments or T-loans on terminated war contracts, is now in the
Government Printing Office. This will be distributed to contractors by
the War and Navy Departments, Smaller War Plants Corporation, Maritime
Commission and other contracting agencies in cooperation with this office.
- 32 -
Regraded Unclassified
206
Because of the existing contractual relationships, it 18 be-
coming evident that further cooperation on the part of industry is neces-
sary to get information to contractors, especially the smaller subcon-
tractors. This office, in cooperation with the contracting agencies, 18
taking steps to encourage cooperation in these efforts on the part of
larger prime contractors and through industry and trade groups. A num-
ber of large corporations have on their own initiative undertaken action
in this direction and every effort 18 being made to have others follow
their example.
Section 20(g) of the Contract Settlement Act of 1944 directs the
Smaller War Plants Corporation to disseminate information and to assist
mall business concerns with their problems on terminated var contracts.
To render every possible assistance to the Smaller War Plants Corpora-
tion in carrying out the provisions of the Act, the Office of Contract
Settlement has maintained close contact with Smaller War Plants Corpora-
tion's personnel charged with contract settlement and information.
Smaller War Plants Corporation will distribute the major portion of the
initial printing of the interim financing booklet.
- 33 -
Regraded Unclassified
C. Training
The War and Navy Departmente have set up training schools for
their employees which have been functioning for varying lengths of time.
The largest and oldest is the Army Industrial College in Washington which
is training not only Army personnel but people from other contracting
agencies. There are also special schools in other places such as Fort
Benjamin Harrison, Ann Arbor, Vandalia, and Harvard.
Contracting agencies are cooperating in the establishment of
special courses for contractors at a number of colleges. Courses are
already being given at Philadelphia, Cincinnati, Cleveland, Toledo,
Detroit, Buffalo, New York City, Dallas, Fort Worth, St. Louis, and
Champaign; and others are being started..
This office is now working with the contracting agencies to
develop simplified and standardized training materials and methods
with particular attention to the training of subcontractors.
D. Cost-plus-a-fixed-fee Contracts.
Approximately 6 billion dollars of cost-plus-a-fixed-fee contracts
have been canceled but little progress has been made in finally settling
them. This 18 due largely to several uncertainties concerning the
extent to which terminated cost-plus-a-fixed-fee contracts can and should
be finally settled by the contracting agencies. This Office is working
to clear up these uncertainties and to develop procedures which will
permit termination settlements of contracts of this type to be kept
abreast of settlements of fixed price contracts. The volume of cost-
plus-a-fixed-fee contracts now outstanding is such a substantial pro-
- 34 -
Regraded Unclassified
portion of the total that delay in settling them finally would seriously
207
impede speedy reconversion.
During performance and before termination, vouchers representing
expenditures under such contracts are transmitted to the representatives
of the contracting agencies, who audit them and pay them if found to be
proper. They are subsequently audited by the General Accounting Office,
which makes inquiries about items which it questions. These in some
cases result in disallowances, which are charged back against the
disbursing officer and in turn against the contractor. In many cases,
therefore, when a coet-plus-a-fixed-fee contract is terminated, there
are pending many matters which are in dispute between the contractor
and the government or which have not been completely processed by either
the contracting agencies or the General Accounting Office. Contractors
have generally been reluctant to make final settlement of their termina-
tion claims unless the settlement can also finally establish their right
to retain payments made on the performed part of the contract. In the
absence of such assurance, moreover, cost-plus-a-fixed-fee contractors
have little incentive to settle with their subcontractors or dispose
of the termination inventories resulting from cancellation.
A legal question has been raised concerning the extent of
the power of the contracting agencies, under regulations established
either by them or by this Office, to agree finally in a termination
settlement on matters relating to the performed part of a terminated
contract. The opinion of the Attorney General on this question has been
requested. This opinion will establish the extent to which this office
can go, in cooperation with the contracting agencies, to develop procedures
to attain the degree of finality in termination settlements of
- 35 -
Regraded Unclassified
settlement and to protect the interests of the Government.
3. Company-wide Settlements
Experiments are actively under way on company-wide settlements.
In several cases a large company with many contracts from more than one
service has been assigned to one of them with authority to make settlements
for all other services and departments. There are many obvious administrative
and legal difficulties. Companies may be prime contractors on some contracts
and subcontractors on others. There are even cases where through intervening
tiers of contractors they may find themselves sub-subcontractors on their
own prime contracts. To overcome these various difficulties is not simple,
but the gain from company-wide settlements in the kind of case to which they
are adapted would be BO great that the experiments are being watched with
close attention.
1. Direct Determination of Claims and Property Disposition - In a
number of cases, particular companies have been assigned to one of the
several contracting agencies with which they deal. This agency has in-
stalled accounting and material disposal personnel, whose decisions may
be relied on by any other agency. This means a great saving in personnel
and does not subject the contractor to reviews by all the different contrac-
ting agencies and customers with which he deals.
2. Local Coordinating Committees - These committees will promote
uniformity in termination procedure, as well as delegation of authority
from one agency to another.
F. Preservation of Records
Section 19(a) of the Contract Settlement Act of 1944 requires
the preservation for specified periods of time of records relating to
- 36 -
Regraded Unclassified
208
war contracts. It also provides that the Director by regulation may
authorize the destruction of records upon such terms and conditions aa
he deems appropriate. To facilitate carrying out the provisions of
this section of the Act, a Special Committee of the Advisory Board on
Preservation of Records has been formed, comprising representa-
tives of the various contracting agencies and headed by a representative
of the Office of Contract Settlement. This Committee will recommend
regulations covering the records which must be preserved by war con-
tractors for the statutory period; the form in which such records
must be maintained; and the records which need not be preserved.
G. Exemption of Foreign Contracts.
Section 25 of the Act permits any contracting agency, subject
to policies prescribed by the Director, to exempt from the Act its
contracts made or to be performed, and any termination inventory situated
outside the United States or in Alaska. Of the three agencies having
the largest volume of foreign contracts, the War Department and Foreign
Economic Administration have already acted, and the Navy Department
is now acting, to exempt such contracts and inventories from the Act. A
determination of the proper scope, if any, for the Act in connection
with foreign contracts is dependent on more detailed knowledge of condi-
tions surrounding foreign procurement than 18 yet available to this office.
- 37 -
Regraded Unclassified
203
APPENDIX A
ORGANIZATION
Exhibit
Page
I
Organization Chart of the Office of Contract
la
Settlement
II
List of Contracting Agencies
3a
III
Activities of The Joint Contract Termination Board
5a
IV
Organization of Major Contracting Agencies
15a
A. War Department
15a
B. Navy Department
19a
C. Maritime Commission
2la
D. Procurement Division - Treasury Department
23a
E. Contractor Organization
23a
a
Regraded Unclassified
OFFICE OF CONTRACT SETTLEMENT
APPEAL BOARD
CONTRACT SETTLEMENT
DIRECTOR
ADVISORY BOARD
1. Hears and decides ap-
Trescribes policies, principles, methods,
1. Advises and consults
peals under Section 13
procedures, and standards to govern the
of the Act.
with the Director on
contracting agencios in performing their
2. Advises Director with
policy matters relating
duties and functions in connection with
to contract settlement.
respect to the rules
contract settlement.
governing practice &
2. Originates or considers
DEFUTY DIRECTOR
procedure before the
policy determinations
Appeal Board.
on contract settlement
Coordinates operations of Office of
matters, utilizing no-
Contract Settlement; acts for Director
CLERK
cessary committees.
in his absence.
Maintains the necessary
services for the Appeal
SECRETARY
Board.
ACCOUNTING
FINANCING
TERMINATIONS
PROPERTY AND
Formulates and recom-
Formulates and recon-
Formulates and recom-
FLANT CLEARANCE
mends accounting poll-
menda policies, prin-
menda policies, prin-
Formulates and recom-
cies, programs, methods,
ciples, methods, pro-
ciples, methods, pro-
mends policies, prin-
procedures, and records
cedures, end standards
cedures, and standards
ciples, methods, pro-
on contract terminations
governing the provi-
governing the contract-
occures, And standards
sion of adequate in-
Inc agencies in the
governing the speedy
terin financine for war
provision of speady and
removel from the plants
contractors having any
fair compensation to war
of war contractors of
termination claim or
contractors for the ter-
termination inventor-
COLECITTEE ON
claims.
mination of war contracts
ies and other property.
TERMINATION ACCOUNTING
CONTITTES ON FINANCING
cor. on TERMINATIONS
ON
AND FLANT CLEARANCE
GENERAL COUNSEL
FROGRESS & STATISTICS
ORGANIZATION AND
TRAINING
PUBLIC INFORMATION
Gives legal advice,
Develope reporting
PROCEDURES
Formulates and recom-
and interpretations of
systems, analyzes data,
Evaluates organize-
Develops policies end
the Contract Settle-
reviews reporting l'oms
mendo moons of promot-
& prepares necessary
tion, procedures, and
programs for the dis-
nent Act.
ing the training of
reports concerning
administration with
personnel for termins-
semination of infor-
contract settlement
respect to contract
tion settlement and
mation on contract
and interin financing.
settlement in con-
interia financing by
settlement.
tracting agencies,
contracting agencies,
war contractors, and
COMMITTEE ON
CONDITTEE ON PROGRESS
cor. on ORGANIZATION
finencing institutions.
CONDITIES ON
LEGAL QUESTIONS
REPORTING STATISTICS
AND PROCEDURES
COLLITTEE or TRAINING
FUBLIC INFORMATION
Appendix-A- Bahibit 1
Note: Suboomittees will be composed of representatives or the interested
210
members of the Contract Settlement Advisory Board, will normally act
under the cheirmanship of members of the Director's storf will dyise
such staff members, end will originate and consider
to the Board on policies os contract termination metters.
Regraded Unclassified
211
Appendix A - Exhibit II
CONTRACTING AGENCIES
(Section 3(g) of the Contract Settlement Act of 1944 defines contracting
agencies as follows: "-any Government agency which has been or hereafter
may be authorized to make contracts pursuant to section 201 of the First
War Powers Act, 1941, and includes the Reconstruction Finance Corporation
and any corporation organized pursuant to the Reconstruction Finance Cor-
poration Act (47 Stat. 5), as amended, the Smaller War Plants Corporation,
and the War Production Board.")
AGENCY
AUTHORITY
Reconstruction Finance Corporation and any
Contract Settlement
Corporation organized pursuant to the
Act of 1944
Reconstruction Finance Corporation Act.
Smaller War Plants Corporation
Contract Settlement
Act of 1944
War Production Board
Contract Settlement
Act of 1944
War Department
E.O. 9001
Navy Department
E.O. 9001
United States Maritime Commission and
E.0. 9001
War Shipping Administration
E.O. 9054
E.O. 9244
Treasury Department
E.O. 9023
Department of Agriculture
E.O. 9023
Governor of the Panama Canal
E.O. 9023
Federal Works Agency
E.0. 9023
Government Printing Office
E.0. 9023
National Advisory Committee for Aeronautics
E.0. 9023
Department of Interior
E.0. 9055
Tennessee Valley Authority
E.O. 9058
Coordinator of Inter-American Affairs
E,0, 9116
Civil Aeronautics Administration
E.O. 9116
3a
Regraded Unclassified
-2-
CONTRACTING AGENCIES (CONTINUED)
AGENCY
AUTHORITY
National Housing Agency
E.O. 9116
Veterans Administration
E.O. 9116
Federal Communications Commission
E.O. 9116
Division of Central Administrative
E.O. 9211
Services of the Office for
E.O. 9471
Emergency Management
Office of Scientific Research and
E.O. 9219
Development
Federal Prison Industries, Inc.
E.O. 9221
Foreign Economic Administration
E.O. 9233
E.O. 9361
E.O. 9380
Office of Strategic Services, United
E.O. 9241
States Joint Chiefs of Staff
Immigration and Naturalization Service
E.O. 9253
of Department of Justice
Department of Commerce
E.O. 9264
War Food Administration
E.O. 9334
4a
Regraded Unclassified
212
APPENDIX A - EXHIBIT III
Mr. Robert H. Hinckley
Director of Contract Settlement
Federal Reserve Building
Washington, D. C.
Dear Mr. Hinckley:
At your request, I have prepared a summary of the
more important actions taken by the Joint Contract Termination
Board, for use in your first report to Congress. I enclose
it herewith in the hope that it will serve the purpose which
you have in mind.
Sincerely yours,
John M. Hancock
Enclosure
5a
Regraded Unclassified
213
APPENDIX A - EXHIBIT III
ACTIVITIES OF THE JOINT CONTRACT TERMINATION BOARD
The Joint Contract Termination Board was organized on
November 12, 1943, by a Memorandum of Agreement signed by the heads of
the six major war procurement agencies (War, Navy and Treasury Departments,
Maritime Commission, Reconstruction Finance Corporation, and Foreign
Economic Administration) and approved by the Director of War Mobilization.
It was the outgrowth of a conviction, on the part of the contracting
agencies and the Office of War Mobilization alike, that a means had to be
created for unifying principles and procedures governing the termination
of contracts and related problems. The Board was vested with the follow-
ing authority and discretion, subject to over-all policies formulated by
the Director of War.Mobilization:
"(a) To establish general principles and procedures governing
contract terminations and settlements which shall be binding on the
Departments. Each Department may establish principles and procedures not
inconsistent with those established by the Board.
"(b) To require from each Department such reports relating to
contract termination settlements as it deems necessary.
"(c) To develop to the extent practicable uniform contract
provisions relating to the termination of contracts and subcontracts,
and to make interpretations of such provisions which shall be binding
on the Departments."
The members of the Board were Mr. Jesse Jones, Secretary of
Commerce; Mr. Robert P. Patterson, Under Secretary of War; Mr. James V.
Forrestal, Under Secretary of Navy; Mr. Robert E. McConnell, Consultant
to the Secretary of the Treasury; Admiral ,Emory S. Land, Chairman of the
Maritime Commission; and Mr. Leo Crowley, Administrator of the Foreign
Economic Administration. Mr. John M. Hancock of the War and Post-War
Advisory Unit of the Office of War Mobilization, at the request of the
Director of War Mobilization, acted as Chairman of the Board, and Lt. Col.
H. C. Rose and Major Cary M. Euwer acted as Secretary and Assistant
Secretary.
The Board met for the first time on the date of its formation
and, from that time until it was superseded by the passage of the Contract
Settlement Act of 1944, held a total of twelve meetings at intervals of
two to three weeks, to consider and act on recommendations made to it by
its subcommittees. Pursuant to the recommendations made by the Baruch-
Hancock Report on February 15, 1944, the Director of War Mobilization, on
February 21, 1944, issued an order adding to the membership of the Board
the Attorney General, the Chairman of the War Production Board, the Chair-
man of the Board of the Smaller War Plants Corporation, and the Comptroller
General of the United States. The Comptroller General, however, advised the
Director of War Mobilization that, for the reasons stated in his letter, he
had concluded that it would be inappropriate for him to serve as a member
Board.
7a
Regraded Unclassified
At its first and second meetings the Board considered the prob-
lems of organization and procedure. It was agreed that it could function
most effectively through the creation of & number of subcommittees, cor-
responding to the several groups of problems that were apparent; that these
subcommittees should be composed of the representatives of the six (later
nine) member agencies most familiar with the particular problems involved;
that these subcommittees should formulate and draft policies to be brought
before the full Board for its consideration when agreement had been reached
or when points of disagreement had been established. Nine such subcommit-
tees were ultimately formed to deal with the following subjects: Contract
Clauses; Property Removal; Facilities Removal; Termination Accounting;
Organization, Procedures and Appeals; Legislation; Reconversion Costs;
Company-wide Settlements; and Interim Financing.
To insure that the activities of the various subcommittees should
form part of a consistent program, liaison among them was maintained through
the Chairman and the Secretary of the Board. The chairmen of the individual
subcommittees were in most cases appointed by the Chairman of the Board from
among the representatives of the member agencies, and consisted of the follow-
ing:
Contract Clauses, Mr. John Kenney, of the Navy Department.
Property Removal, Mr. William L. Marbury, of the War Department.
Facilities Removal, Col. Homer Jones, of the War Department.
Termination Accounting, Comdr. J. Harold Stewart, of the Navy
Department.
Organization, Procedures & Appeals, Col. Miles Reber, later
Col. William H. Draper, Jr., of the War Department.
Legislation, Mr. John M. Hancock, of the Office of War Mobilization.
Reconversion Costs, Mr. Carman Blough, of the War Production Board.
Company-wide Settlements, Mr. Robert E. McConnell, of the Treasury
Department.
Interim Financing, Col. Paul Cleveland, of the War Department.
In ordinary course, particular subjects were referred by the full
Board for the consideration of the appropriate subcommittee. When that sub-
committee reached B. conclusion, it referred to the Chairman of the Board a
draft of proposed policy or alternative drafts on disputed points. The
Chairman then laid the matter before the Board with his recommendation.
After the Board had voted on the proposal, the Chairman recommended it for
the approval of the Director of War Mobilization; and formal action was
taken by means of a Directive from that office. The six Directives dis-
cussed below were issued, each pursuant to the unanimous recommendation of
the Board.
8a
Regraded Unclassified
214
Directives 1, 2 and 4, dated respectively January 8, February 24
and May 2, 1944, (See Appendix B) made effective and interpreted the Uni-
form Termination Article for Government Fixed Price Supply Contracts and
the Statement of Principles for Determination of Costs upon Termination
of Government Fixed Price Supply Contracts.
For a number of months prior to the. organization of the Joint
Contract Termination Board, representatives of the War and Navy Departments
and of the War Production Board had been at work on a uniform provision
covering the termination of contracts for the convenience of the Government.
This work had involved extensive consultation with industry and had gone
far to develop the principles which should govern methods of, and compensa-
tion for, termination of contracts at the option of the Government. At the
first meeting of the Joint Contract Termination Board, it was agreed that
discussions on this subject must be brought to a quick conclusion; and the
matter was accordingly referred to the Subcommittee on Contract Clauses.
This Committee, which included much of the personnel that had participated
in the prior studies, recommended to the Board on December 31, 1943, a
uniform termination article for use in fixed price contracts for the manu-
facture of war supplies in the United States, and a statement of principles
for determination of costs, which was incorporated by reference in the
Termination Article.
The Article permitted termination of work whenever the contract-
ing officer determined it to be in the best interests of the Government,
and described in some detail the actions to be taken by the contractor in
stopping work, terminating subcontracts, and taking other necessary steps
for this purpose. It then provided that the contractor and the contract-
ing officer might agree upon the whole or any part of the amount to be
paid to the contractor by reason of the termination. In the event of the
failure of the contractor and the contracting officer to reach such an
agreement, the Article included a formula pursuant to which the contractor's
compensation was to be determined. This formula provided for the payment
to the contractor of the contract price for completed articles accepted
by the Government or sold or retained by the contractor; his costs of other
work in process at the time of termination; a profit on these costs in an
amount not in excess of 6 percent, with a lower rate of profit on the cost
of materials not processed by him; his costs of settling claims under
terminated subcontracts; and his reasonable expenses in making settlement
and caring for Government property.
The Termination Article also included a provision that determina-
tions of cost under the formula should be governed by the Statement of
Principles for Determination of Costs upon Termination of Government Fixed
Price Supply Contracts. This Statement declared that such costs were in-
tended to be those sanctioned by recognized commercial accounting practices,
including direct and indirect manufacturing, selling and distribution, ad-
ministrative and other costs incurred which were reasonably necessary for
the performance of the contract and which were properly allocable to it.
The Statement indicated in addition the treatment to be given to certain
particularly significant items of cost, including common inventory, de-
preciation, loss on special facilities, initial costs attributable to the
entire contract, and other specified items.
9a
Regraded Unclassified
Pursuant to the unanimous approval of the Board, the Uniform
Termination Article and the accompanying Statement of Cost Principles were
made effective by Directive 1 of the Office of War Mobilization, dated
January 8, 1944. It was agreed by the Board, however, that, for various
reasons, certain types of contracts were unsuited to the inclusion of the
Uniform Termination Article. Accordingly, on February 24, 1944, the
Director of War Mobilization issued Directive 2 (See Appendix B,
Exhibit I), exempting from mandatory use of the Article contracts in the
following categories: Contracts for less than $50,000, and those for
less than $500,000 providing for delivery within six months; letters of
intent and other preliminary arrangements which contemplated the sub-
sequent execution of formal contracts; contracts between Governmental
bodies; contracts for the purchase of by-products or co-products whose
cost could not be separately ascertained; arrangements which, although
made in the name of the Government, are in effect subcontracts rather than
prime contracts; contracts intended to exclude profit; and requirement or
open-end contracts. The terms of the Directive made the use of the Article
mandatory in all other fixed price contracts entered into by the member
contracting agencies for the manufacture in continental United States of
war supplies and equipment unless the particular contract was exempted by
the Office of War Mobilization prior to its execution. The Order also
required all other Governmental agencies to use the Article in their war
contracts of the types above described whenever it deemed such use to be
feasible.
In the period immediately following the promulgation of the
Uniform Article, certain questions were raised regarding the proper
interpretation of some of its provisions. On May 2, 1944, pursuant to
prior action by the Board, the Director of War Mobilization issued
Directive Order 4 (Appendix B, Exhibit III) for the purpose of clari-
fying these questions, that dealt with four technical points: the
extent to which the Article required prime contractors to transfer to
the Government rights under terminated subcontracts; the extent of the
Government's obligation, in the case of a formula settlement, to accept
delivery of and pay at the contract price for articles completed but not
delivered at the date of termination; the extent to which judgments
against the prime contractor on terminated subcontracts would be regarded
as fixing the liability of the Government to reimburse the prime contrac-
tor; and the scope of the provision permitting the Government to withhold
from the prime contractor amounts corresponding to the unpaid claims of
subcontractors or suppliers.
Directive Order 3 (Appendix B Exhibit II) of the Office of War
Mobilization was also issued on May 2, 1944, and dealt with the jurisdiction
of the Joint Contract Termination Board and the Surplus War Property Adminie-
tration over policies governing the price at which contractors' inventories
allocable to terminated contracts might be sold. Pursuant to the recommenda-
tions of the Baruch-Hancock Report, the Surplus War Property Administration
had been created on February 21, 1944, by Executive Order 9425 to coordinate
and unify Governmental policy in the disposition of various types of war
surpluses. The Executive Order creating this Administration did not ex-
pressly confer upon it jurisdiction over the price at which contractors' in-
ventories involved, in termination settlements should be sold. The disposi-
tion of such inventories was, however, so closely related to the disposition
10a
Regraded Unclassified
2:5
of other identical or similar surplus property, that the price policies in
the two fielda needed to be coordinated by B. single agency. Accordingly,
the Joint Contract Termination Board unanimously resolved to delegate its
authority over such pricing policies to the Surplus War Property Adminis-
tration.
Directive 5 (Appendix B, Exhibit IV) was likewise issued on
May 2, 1944. It dealt with two subjects: the general principles govern-
ing the organization which should be maintained by the contracting agencies
to settle terminated war contracts; and the extent to which contractors'
termination settlements should be reviewed within the agencies.
The statement regarding organization emphasized the necessity
for providing adequate numbers of trained personnel and for the efficient
use of available personnel by cross-delegations and exchange of information.
As to headquarters organization, it dealt with the necessity for adequate
control by means of statistics and adequate supervision to maintain uni-
formity. As to organization at the negotiating level, the statement pointed
out that contracting officers negotiating termination settlements must be
properly supported by qualified technical personnel; that in some cases the
most effective use of such technical personnel could be achieved by assign-
ing it to the plants of particular contractors to act on behalf of all
agencies; that personnel engaged in procurement should be utilized to the
extent feasible; that the related function of the disposition of property
arising out of contract terminations might be performed either by personnel
under the supervision of the negotiating officer, or by a separate organiza-
tion, according to the needs of the particular contracting agency; and that
the extent to which operations should be decentralized should take into
account the needs of contractors as well as the necessity for a judicious
use of contracting agency personnel.
The statement covering review of contract termination settlements
advocated the fullest practicable use of negotiation to arrive at speedy,
final determinations. It recognized the need, consistently with the fore-
going, to maintain proper control over such settlements by adequate reviews.
To this end it required each procuring agency to establish one or more settle-
ment review boards, decentralized to the maximum practicable extent, and
provided that no negotisted settlement of any prime contract or subcontract
should become final without review by such a board, if it involved a gross
amount of $50,000 or more, exclusive of payment for completed articles at
the contract price and exclusive of settlements with subcontractors.
Directive Order 6 dated May 29, 1944, made effective an approved
termination provision for use in fixed price orders or subcontracts for the
manufacture of supplies given to subcontractors by holders of Government war
contracts, as well as a statement of policy concerning the settlement of claims
under such orders and subcontracts.
Discussions had taken place among the contracting agencies for a
number of months about the desirability of establishing a uniform basis for
the settlement of subcontracts under Government prime contracts. It had been
concluded that it was impossible to prescribe a mandatory clause for use in
subcontracts without seriously interfering with procurement. It was the gen-
eral belief, however, that uniformity and speed in the settlement of subcontracts
11a
Regraded Unclassifie
would be materially promoted by the promulgation of a recommended sub-
contract termination clause, embodying in abbreviated form the principles
of the Uniform Termination Article for use in prime contracts. Accord-
ingly, such a termination clause was unanimously proposed to the Director
of War Mobilization, accompanied by a statement of principles governing
the approval and reimbursement of subcontract settlements.
This statement declared it to be the policy of the Government
to favor the settlement of subcontracts on the basis of the recommended
subcontract termination article, whether or not the particular subcontract
contained the article. The statement further recognized the fact that it
would be impracticable for Government personnel to review all contract
settlements in all tiers in view of their enormous number; and that great
reliance must therefore be placed on the reviews made by contractors in
higher tiers. For the same reason, it authorized the contracting agencies
to delegate to prime contractors and subcontractors, whose methods of mak-
Ing settlements had been reviewed and found adequate, the authority to make
final settlements of the claims on their subcontractors.
In addition to the above-described actions of the Joint Contract
Termination Board which were formalized by directive of the Office of War
Mobilization, two other statements of policy received the unanimous approval
of the Board: one dealing with the removal from contractors' plants of in-
ventory attributable to terminated war contracts; and the second dealing
with the means of providing war contractors with adequate interim financ-
ing between termination and final settlement.
The statement of policy as to removal and disposition of property
in connection with contract termination approved by the Board on December 31
1943, was published as an appendix to the Baruch-Hancock report. It
recognized the necessity of prompt clearance from contractors' plants of
completed articles, component parts, work-in-process, raw materials and
equipment, to facilitate continued war production as well as speedy recon-
version to peace-time manufacture. For this purpose it recommended that
broad powers of disposition of such property be vested in the procuring agen-
cies, and that a central agency be designated to which might be transferred
property not disposed of by the procuring agencies and no longer required
by them. The statement likewise provided for the submission to the govern-
ment by the contractor of lists of such property in his possession upon the
termination of a war contract. It also imposed upon the contracting agency
the obligation to remove from the contract's plant, at the expiration of a.
sixty-day period, all listed property which the contractor had not either
previously disposed of with the approval of the contracting agency or
elected to retain. In the event that the Government failed to remove the
property within this period, the contractor was to be allowed either to
store it on his own premises, or to remove it and store 1t, at the expense
of the Government in either event. The statement also included general
principles to govern the price at which the contractor was to be permitted
to retain such property or sell it to others.
12a
216
The above-described statement covered only the disposition of
termination inventory, and excluded from its ecope government-owned
facilities or production equipment in contractors' plants. A subcommit-
tee of the Joint Contract Termination Board was formed to consider the
latter subject. It had not concluded its work at the time when the Con-
tract Settlement Act of 1944 became effective, but, at the request of the
Director, continued its deliberations, which culminated in Regulation
No. 4 of the Office of Contract Settlement (Appendix B, Exhibit VIII).
On February 4, 1944, the Joint Contract Termination Board un-
animously adopted the statement of policy on termination financing, which
likewise appeared as an appendix to the Baruch-Hancock report. This state-
ment recognized the necessity of legislation before it could be made fully
effective. The necessary legislative authority was not secured until the
passage of the Contract Settlement Act of 1944, and the statement of policy
was never, therefore, promulgated by directive of the Office of War Mobiliza-
tion.
The statement paralleled closely the provisions for interim
financing subsequently included in the Act, both as to partial payment and
as to guaranteed loans. It recommended that prompt payment be made for com-
pleted articles undelivered at the time of termination; and that, within
thirty days after the receipt of the contractor's certificate setting out
his estimated costs, the contracting agency should advance 100 percent of
the estimated factory cost of his inventory, 100 percent of his advances
to subcontractors, and reasonable percentages of his other costs, but not in
excess of 90 percent of the contracting agency's estimate of his entire claim.
The statement also recommended the establishment of a system of guaranteed
loans to finance termination claims, similar to the V-Loans used to finance
production. In aid of the entire interim financing program, it recommended
also the allowance of interest on unpaid balances of contractors' claims.
An account of the activities of the Joint Contract Termination
Board would not be complete without a reference to its participation in the
hearings and discussions leading up to the enactment of the Contract Settle-
ment Act of 1944. A subcommittee on legislation was created for the purpose
of quickly coordinating the opinions of contracting agencies on the numerous
questions of policy concerning the proposed legislation which were raised at
various stages of ita consideration by the Senate Committee on Post-War
Planning, the Senate Military Affairs Committee, the House Committee on Post-
War Planning, the House Judiciary Committee, and the Conference Committee.
This work involved numerous sessions of the subcommittee, and consideration
of major policy issues at several meetings of the Board itself.
In addition to the foregoing matters, which resulted in final
action during the period of the existence of the Joint Contract Termination
Board, reference should also be made to five other subjects which received
extended consideration by subcomittees of the Board or by the Board itself.
These are the adequacy of existing provisions covering contractors' costs
of reconverting their plant to peace-time production; the feasibility and
desirability of direct settlement by the Government of all or a substantial
part of the contracts and subcontracts of a particular contractor with various
procurement agencies and customers; the development of uniform forms for use
by contractors and subcontractors in the settlement of their termination claims
13a
the development of cost memoranda elaborating the Statement of Cost
Principles; and the development of standards to guide the negotiation of
settlements.
A. subcommittee of the Board was formed to consider the question
of reconversion costs. After extended deliveration, it recommended to the
Chairman of the Board that, in view of other governmental policies, pri-
marily those applied in renegotiation and those of the tax laws permitting
the carry-back or carry-forward of losses for a period of two years, addi-
tional provision should be made for reconversion coste only in hardship
cases.
Another subcommittee was formed for the purpose of considering
the possibility of providing for the settlement of some or all of the claims
of a particular company under prime contracts and subcontracts with different
procurement agencies or customers. A difference of opinion among the agen-
cies developed as to the practicability and desirability of this means of
settling claims. The subcommittee submitted to the Chairman a report advocat-
ing the adoption of this method of settlement but reflecting also the views
of the agencies which doubted its practicability. To resolve the conflict
of opinion thus presented, the War and Navy Departments initiated certain
experiments with a limited number of companies to test the workability of
grouping prime contracts and subcontracts for the purpose of settlement.
These experiments were incomplete at the time when the Joint Contract
Termination Board ceased to function.
The subcommittee formed to consider questions relating to
organization, procedures and appeals took under consideration the advisability
of developing forms, which would be uniform for all contracting agencies, for
all prime contractors and subcontractors in submitting their claims. Two
seta of such forms were developed, which were put into experimental use by
the War and Navy Departments, to obtain the data necessary to establish the
most appropriate forms for general use. This experimental period had not
ended when the Contract Settlement Act became effective.
The subcommittee on termination accounting held a number of meet-
inge to consider and formulate a series of cost memoranda interpreting and
clarifying various provisions of the statement of cost principles announced
in connection with the uniform termination article. These costs memoranda
were likewise in tentative form at the effective date of the Contract Settle-
ment Act.
The subcomittee on contract clauses devoted several meetings to the
problem of the standards that should be applied in the negotiation of settle-
ments, a matter left open by the provisions of the uniform termination article.
Differing opinions developed as to the degree to which the provisions covering
formula settlement should controll the negotiation. These were reflected in
alternative drafts submitted by the subcommittee to the Chairman of the Board.
This problem required reconsideration in view of the terms of the Contract
Settlement Act before the standards governing negotiated settlements could be
announced in Regulation No. 7 of the Office of Contract Settlement (Appendix B,
Exhibit XI).
The records of the Joint Contract Termination Board and the matters
in process in the Board and its subcommittees were made available to the Office
of Contract Settlement upon its organization.
14a
Regraded Unclassified
2.7
ORGANIZATION OF MAJOR CONTRACTING AGENCIES
The "doing of the job" of contract termination and settle-
ment falls upon the contracting agencies. However firm and sensible
the policy decisions may be at staff levels, the test comes in the
performance 02 actual terminations and settlements. The quality of
the program ie ultimately governed by the adequacy, in quality 88 well
as quantity, of the personnel and management of the operating unite of
the contracting agencies. The huge and complex tasks of developing
organization, devising procedure, recruiting and training staff, and
formulating detailed policy for the settlement of claims under ter-
minated contracts fall upon the procurement agencies. The efficacy
and speed with which the various phases of settlement are carred on
depend in large measure upon the manner in which the individual con-
tracting agencies cope with these problems of administration.
In dealing with these matters the individual agencies of
practical necessity must be permitted broad discretion within the
general standards fixed by the Contract Settlement Act and the regula-
tions of the Office of Contract Settlement. Administrative arrange-
ments for contract settlement were in process of development long before
the passage of the Contract Settlement Act. Almost from the beginning
of war production the procurement agencies had to handle at least a
small load of settlement work. Mechanisms for dealing with this flow
of claims were developed. AB the time for large-scale terminations
approached, emphasis in organizational planning came to be placed upon
preparations for large-scale operations.
A. War Department
Among the major contracting agencies, the settlement problem
first became of significance in the War Department. Consequently it was
the first agency to give systematic attention to policy, organization,
the procedure for contract settlement. In the summer of 1941 the War
Department, in the course of a revision of its contract forms, adopted a
new termination article reflecting departmental policies on the settle-
ment of fixed-price supply contracts canceled for the convenience of the
government. This termination article was revised from time to time. In
October, 1942 the principle of negotiated settlement was introduced into
the termination article. Experience with the War Department termination
article contributed to the formulation of the uniform termination article
for fixed-price contracts, later made mandatory for all agencies by the
Office of War Mobilization. Settlement under the termination clause was
first handled as an incident to procurement; but as the volume of termina-
tions grew, it became nececcsary to develop more elaborate organization,
15a
Regraded Unclassified
procedures and instructions regarding settlement. This trend was
reflected in the comprehensive statement of termination policy and
procedure issued by the Department in August 1943 with subsequent
revisions.
Department-wide policy on contract settlement matters
flows from the Readjustment Division. The formulation of policy
regarding settlements within the War Department 18 a responsibility
of the Director, Readjustment Division, Headquarters, Army Service
Forces, "acting under the supervision of the Director of Materiel
in matters relating to the Army Service Forces, and as the Special
Representative of the Under Secretary of War in matters relating to
the Army Air Forces. "* Centralization of policy formulating responsi-
bility in the Reed justment Division 18 accompanied by a high degree
of decentralization of actual administration of contract settlement
to the chiefs of the technical services, 1.e., the Ordnance Department,
the Signal Corps, the Corps of Engineers, the Chemical Warfare Service,
the Medical Department, the Quartermaster Corps, and the Transportation
Corps.
The Readjustment Division settles no contracts; it formulates
policy in accordance with which the operating unite make settlements.
In general, the functions of the Readjustment Division are those
suggested by the Joint Contract Termination Board in May, 1943 for
"control organizations" to be established in each agency to supervise
termination activities and to 866 that government-wide policies were
carried out within the agency. The functions of the Readjustment
Division are performed through several branches. The Contract Settle-
ment Branch formulates policies and procedures for the settlement of
terminated contracts. In developing policies, the Branch works with
agencies outside the Department, such as the Office of Contract
Settlement, and with other units of Headquarters, Army Service Forces.
Its relations are particularly close with the Office of the Fiscal
Director which has overall responsibility for accounting in the Army
Service Forces and also is concerned with interim financing. The
Property Disposal Branch develops policies governing the disposal
of property surplus to War Department needs including that which
results from the termination of contracts. War Department policies
on this subject are stated in its Procurement Regulation No. 7. The
Control Branch develops forms. It receives reports from the technical
services on progress in the termination and settlement of contracts
and consolidates and analyzes these data to aid the Division in eval-
uating the work of the technical services. A Training Branch is re-
sponsible for the supervision and coordination of methods used by
the centralized schools of the Department and by the technical services
in the training of government and contractor personnel in the problems
of contract settlement.
Responsibility for settlement of claims, within the limits
of the general principles prescribed by Procurement Regulation No. 15,
is delegated to the chiefs of the technical services of the Army Service
Forces and to the Commanding General, Army Air Forces, who are empowered
*Procurement Regulation No. 15.
16e
Regraded Unclassified
218
further to delegate settlement authority to their subordinates. In
the assignment of duties within the technical services, the chiefs
possess sufficient discretion to adapt their organizational arrange-
ments to the peculiar requirements of each service. Certain department-
wide requirements, however, must be met by each technical service.
Each technical service, for example, must establish one or more
settlement review boards for the purpose of reviewing settlements
proposed by negotiating officers. Department policy requires that
proposed settlements providing for the payment to any prime contr actor
or to any subcontractor of an amount in excess of $25,000 be examined
by such a review board prior to approval, Additional types of review
are provided for settlements in excess of $500,000. These review
practices are in accord with general standards set by the Joint
Contract Termination Board in May 1943, and subsequently by Congress
in the Contract Settlement Act.
Although the organization for settlement work varies in detail
among the technical services, each has at its headquarters a staff unit
with responsibility for developing such supplementary instructions to
those contained in Procurement Regulation 15 as may be necessary, for
developing organization and procedures for settlement within the
service, for collecting and analyzing data on progress in settlements
by the subdivisions of the service, for staff assistance in the super-
vision of settlement operations, and related matters. These staff
units aid the chief of the technical services in the supervision of
settlement work whic is ordinarily decentralized, either geographically
or functionally, to subordinate divisions of the service.
In the Office of the Quartermaster General, for example, there
is a Contract Termination Branch of the Procurement Division which is
responsible for the supervision of settlement work. This 1s handled
in the main by the five Depots in Philadelphia, Jersey City,
Jeffersonville, Chicago, and Boston. The Contract Termination
Branch issues instructions to the Depots regarding organization and
procedures for termination, receives and analyzes reports on progress
by the Depots, makes checks of progress by the Depots in settlement,
interim financing and property disposal, and assists in arranging
training programs for Depot and contractor personnel. The Legal
Branch and the Cost and Price Analysis Branch of the Office of the
Quartermaster General also have certain responsibilities in the
review and supervision of the work of the Depots. Another feature
of the OQMC headquarters organization is a Settlement Review Board
which reviews proposed settlements involving in excess of $100,000
forwarded to it from the Depots. About 99 percent of all claims are
settled finally at the Depots. However, the Board does examine on
its own initiative sample settlement agreements involving less than
$100,000, not with the object of revision but as 8 means of supervising
Depot operations and of determining the need for changes in policy and
procedure.
17a
Regraded Unclassified
In the Ordnance Department the organization in the Office
of the Chief of Ordnance is broadly similar to that described in
the preceding paragraph. The Contract Termination Branch of the
Legal Division 1a charged with staff responsibility for contract
settlement. The rules of Procurement Regulation 15 are interpreted
and supplemented by this Branch and issued for the guidance of the
Ordnance Districts as Ordnance Procurement Instructions. The Branch
examines problems brought to its attention by the Ordnance Districts
and makes suggestions to the Districts for improvements in organiza-
tion and procedure.
Although there are variations in detail, each of the other
technical services has at its headquarters an organizational unit
with responsibility for assuring administration of settlement within
the service in accordance with departmental policy. Below the
Washington headquarters of the technical services, organization for
settlement work varies with the structure of each service. A
description of the chief general types of administrative arrangements
of the technical services' organizations for settlement may be useful.
One type of organization is exemplified by that of the Ordnance
Department which has divided the country into thirteen Procurement
Districts, each of which has final responsibility for the settlement
of terminated ordnance contracts held by contractors located within
the District. Among the districts there is further diversity in
organization. In most Ordnance Districts there are certain commodity
branches -- small arms, artillery, tank-automotive, and ammunition --
with responsibility for procurement, inspection, and production
engineering. In some districts each of these commodity branches has
a termination section with responsibility for settling canceled
contracts over which the branch has jurisdiction. In other districts
a single termination brangh settles all contracts canceled within
the District regardless of the product involved. Each District has,
in keeping with departmental policy, a settlement review board which
examines proposed settlements and recommends action to the District
chief.
Another type of organization below the technical service
headquarters level is illustrated by the Signal Corps, the principal
operating units of which are three districts -- Dayton, Monmouth,
and Philadelphia. Unlike the Ordnance Districts, the Signal Corps
Districts are specialized by commodity rather than by area. The
Dayton district, for example, procures airborne radio equipment from
plants all over the country while the Philadelphia office buys all
ground radio equipment except radar. In a sense, then, Signal Corps
procurement is centralized in a number of places outside Washington.
Subject to supervision from the Office of the Chief Signal Officer
in Washington, the district offices terminate and settle contracts.
In each district a review board examines proposed settlements
involving more than $25,000 while proposals of over $500,000 are
transmitted to Washington for review by the Settlement Review Com-
mittee in the Office of the Chief Signal Officer. Under the type of
organization prevailing in the Signal Corps a situation can arise in
18a
Regraded Unclassified
219
plant. Procedures exist for the assignment to such plants of 8. single
team to act for all district offices in the settlement of canceled
contracts for signal equipment, The technical services of the
Department in their form of organization for procurement and contract
settlement fall broadly into the two classes typified by the Ordnance
Department and the Signal Corps.
Through the evolution of organization since the settlement
problem became of importance, there has evolved an elaborate machin-
ery within the Department to formulate at top levels policy on
settlement, to transmit instructions to the technical services, and
to supervise and review the work of settlement at the operating
levels in the services. All this has resulted in substantial
accomplishment by way of preparation for coping with larger settle-
ment loads.
The War Department organization for settlement, as in the
case of all the contracting agencies, is constructed on the principle
that the unit which placed EL contract should settle 1t. To a small
degree modifications of the vertical system have occurred within the
War Department to minimize the duplication of effort and confusion
that may occur when several subdivisions of a department have con-
tracts with a single plant. The arrangements within the Signal Corps
to assign plants to a single district office for settlement of all
claims under contracts for signal equipment have been noted. In
addition, procedures exist and have been used to some extent to assign
B. plant to a single technical service for accounting review and disposal
recommendations under all War Department contracts regardless of the
technical service of origin. The War Department and the Navy Department
are setting up joint Termination Coordination Committees in appropriate
regions of the country to cooperate and to insure uniformity of pro-
cedure. These committees can in special cases allocate a contractor to
a particular service or department and the other services or departments
may recognize the audits and the disposal recommendations of the service
assigned. This new development shows promise of simplifying many other-
wise complicated cases. If it proves as successful as hoped, it may
eliminate a great deal of duplication.
B. Navy Department
The broad structure of the Navy Department for the settle-
ment of contracts consists of a policy formulating and supervisory
unit at a high level with the actual settlement of contracts vested
in the Various procuring subdivisions of the Department, Procedures
and machinery for settlement have, as is general, been grafted onto
the procuring organization. The characteristics of the settlement
organization are, therefore, derived from the procurement machinery.
The fairly high degree of centralization in Navy Department procure-
ment practices are thus reflected in the settlement machinery. In
general, the Navy Department has not found it necessary to install
very elaborate administrative machinery or to train 8 very large
staff. Its settlement load 's comparatively small and the expectation
is that a sharp upturn in terminations will occur, if at all, much
later than in the War Department procurement program.
19a
Regraded Unclassified
The Industrial Readjustment Branch of the Office of Procure-
ment and Material 1a vested with general responsibility for the
establishment, supervision, and coordination of policies and pro-
cedures in the Navy Department relating to contract settlement,
property disposition, and related matters. This Branch, which 18
under the direction of the Assistant Chief of Procurement and Material
for Industrial justment, was established in November 1943, and
superseded earlier assignments of responsibility for policy super-
vision of contract settlement which is carried on Jy the Bureaus of
the Navy Department, the Coast Guard, and the Marine Corps. The
Branch issues departmental policy instructions, receives reports from
the Bureaus on progress in settlement, and all Bureaus have been in-
structed to submit to it for approval, before issuance, directives of
general application on contract settlement and property disposition.
Responsibility for the application of settlement policies
in particular cases reste in the procuring Bureaus. Subject to
certain broad policies of department-wide application, the chiefs of
the Bureaus have discretion in making internal organizational arrange-
ments for settlement. Among the more important of these general
requirements is that each Bureau have one or more review boards to
examine proposed settlements if the aggregate amount to be paid
exceeds $50,000. However, settlements involving $500,000 or more
must receive the approval of the chief of the Bureau before payment
18 made. In addition, each Bureau chief must establish procedures
by which contractors may appeal the determinations of contracting
officers.
The degree to which settlement authority 18 decentralized
differs among the Bureaus of the Department. The settlement officials
of the Bureau of Ships and the Bureau of Ordnance are located at
headquarters. The Bureau of Aeronautics, however, has decentrelized
settlement authority to its three district offices at New York,
Dayton, and Los Angeles. In each district there 18 a board of review
with authority to approve settlements up to $500,000; proposed settle-
ments involving sums in excess of that amount are transmitted to
Washington for review. The Bureau of Supplies and Accounts has dis-
tributed its responsibilities for settlement in accordance with the
assignmente of procurement cognizance. The Bureau in Washington
settles contracts made in Washington while nineteen offices outside
Washington settle claims arising under contracts which they placed.
At these offices there are review boards to examine proposed settle-
ments. Similarly, the Bureau of Yards and Docks has delegated
settlement responsibility to its Advance Base Department in Chicago,
which handles procurement for this aspect of the Bureau's program.
The Navy Department organization 18 identical in principle
with that of the War Department in making the subdivisions of the depart-
ment charged with procurement responsible also for settlement. However,
20a
Regraded Unclassified
220
the Navy Department organization includes certain additional features
for which there is no parallel in the War Department. The Cost
Inspection Service, a part of the headquarters organization of the
Bureau of Supplies and Accounts, has a Navy-wide role in contract
settlement. The Service adivees all the Bureaus with respect to
accounting problems arising in contract terminations and it may be
relied on by the cognizant Bureau to make an accounting review of
contractors' claims. Similarly, the inspectors of naval material who
perform in the field services for all the procuring Bureaus likewise
assist in the settlement process. The material inspector with cog-
nizance over a particular plant reviews all claims submitted by the
plant and furnishes information. to the contracting officer regarding
materials on hand and work in process covered by the claim. The Naval
Material Redistribution and Disposal Agency, generally referred to BB
the NMR&DA, has charge of all disposal of termination inventories and
surplus material, regardless of the Bureau originating the procure-
ment contract. The headquarters of this administration is in
New York City, but its disposel offices are located through the
country.
C. Maritime Commission
Arrangements for the settlement of contracts within the
Maritime Commission differ considerably from those existing in either
of the two agencies already described. The principal characteristics
of the Commission's organization for settlement, as in the case of
other agencies, are fixed by the structure of the machinery for
procurement. Probably the most noticeable difference between the
Maritime Commission and the War and Navy Departments is the high
degree of centralization of the power of decision in settlement
matters in the organization of the Maritime Commission.
General responsibility for coordinating and supervising
activities of the Commission in the settlement of termination claims
and the disposition of property is vested in an assistant to the
Vice Chairman of the Commission. In the formulation of policy this
assistant is advised and aided by the Procedure Committee for Contract
Terminations and Canceliations and Surplus Property Disposal, of which
he serves as chairman. The committee consists of the directors of
the Commission divisions most concerned with settlement matters and
other high-ranking administrative officials. It may, within the
general sphere of its responsibility, make such recommendations
as it deems advisable to the Commission and it may also amend or
supplement the Commission's regulations governing settlement to the
extent necessary to adjust Commission practice to the requirements
of the Office of Contract Settlement. The Commission reserves to
itself the power to make other types of amendments. In general, the
assistant to the Vice Chairman and the Procedure Committee in combina-
tion perform the functions of policy formulation and supervision which
are carried on in the War Department by the Readjustment Division and
in the Navy Department by the ReadJustment Branch of the Office of
Procurement and Material.
21a
Regraded Unclassified
The negotiation of settlements 1s conducted principally by
the Commission's Procurement Division and by ite Regional Directors
of Construction. Each of the Regional Directors (East Coast,
Philadelphia; Gulf Coast, New Orleans; Great Lakes, Chicago;
West Coast, San Francisco) has established within his office a
Termination Section which carries out the functions of the regional
office in the settlement of terminated contracts. Those functions
are limited to the negotiation and determination of settlements on
claims arising under contracts for the construction of vessels or
the construction of shipyard facilities but no such action by the
Regional Director becomes effective until after review by the Settle-
ment Review Board in Washington, The Regional Director may, however,
approve conclusively subcontract claims not in excess of $5,000. He
is also charged with the duty of reviewing termination claims arising
under contracts placed by individuals, firms, or corporations acting
as agents for the Commission. Such claims in excess of $5,000 must,
however, be presented to the Settlement Review Board for approval.
The responsibilities of the Procurement Division in
Washington for the settlement of claims relate to contracts placed
by it for materials, equipment and supplies to be furnished to
shipyards for incorporation into vessels. The Commission through
the purchases of the Division furnishes large quantities of equipment
and materials to be incorporated into standardized vessels built by
different yards. To carry out the tasks associated with settlement
of its contracts, the Division has established a Contract Termination
Section which receives claims and negotiates settlements. The Section
may utilize the Finance Division to make such audits as are necessary
and it may call on Regional Directors to make examinations of plants
when necessary in connection with settlement. The final authority of
the Procurement Division to settle extends only to settlements not in
excess of $5,000; proposals in larger amounts must go before the
Settlement Review Board.
The Settlement Review Board consists of three members of the
Commission and four subordinate officials of the Commission. All pro-
posed settlements in excess of $5,000 are reviewed by the Board which
in the case of proposals not in excess of $100,000, acts through a
panel of three or more members designated by the Chairman of the
Commission. When claims in excess of $100,000 are under consideration,
of quorum of the Board consists of five members including two members
of the Commission. Thus the process of review in the Maritime
Commission occurs at a higher level in the organization than in the
other major procurement agencies. The Settlement Review Board also
possesses certain powers not commonly exercised by such boards, It,
for example, 18 empowered to authorize contractors to settle termina-
tion claims not in excess of $5,000 arising under subcontracts.
22a
Regraded Unclassified
221
D. Procurement Division-Treasury Department
The Procurement Division of the Treasury Department presents
yet another type of settlement organization. With a comparatively
small load of settlement work the Division has not found it necessary
to develop a large and specialized organization to direct and carry
on the negotiation of settlements. This activity tends, rather, to
be incidental to the purchasing activities of the Division which
chiefly consist of procurement of non-military items for the Foreign
Economic Administration,
In the development of settlement policy, the Director of
Procurement is advised by a Consultant to the Director on Contract
Settlement. In addition on settlement policy matters, the Secretary
of the Treasury has a special consultant. The small-scale operations
of Treasury Procurement makes it possible to handle policy formulation
with a small organization.
The actual negotiation of settlements is handled by either
one of two designated officials of the Division, the Deputy Director
for Operations and the Chief of the Contract and Purchase Branch, each
of whom has been authorized to act as a "contracting officer" in the
negotiation of settlements. After advising the contractor of steps
to be taken in submitting a claim, the contracting officer directs
an inspector from the nearest Division Regional Office to inspect
articles completed but not delivered and to check the inventory.
The contracting officer also has the assistance of property disposal
staff (usually from the Division's Regional offices), attorneys from
the Office of the Chief Counsel of the Treasury, and accountants from
the Procurement Division Price Adjustment Board staff.
All proposed settlements are submitted by the contracting
officer to the Contract Termination Settlement Review Board which con-
siets of five members and was set up in May 1944 in conformity with
policies developed by the Joint Contract Termination Board.
E. Contractor Organization
In any consideration of organization for contract settle-
ment some mention must be made of prime contractors who perform an
important role in the preparation of claims. In the review of claims
under subcontracts the termination personnel of those prime con-
tractors authorized to settle such claims become virtually an
extension of the government's settlement organization.
23a
Regraded Unclassified
Extensive data on contractor organization are not readily
available but it is well known that some contractors have made great
progress in staffing termination units and in developing their
internal procedures for the preparation of claims. Contracting
agencies have, with varying degrees of intensity, stimulated and
promoted such action by the contractors. The Army Air Forces, for
example, has carried on an energetic campaign to induce contractors
to develop termination machinery and has rated contractors according
to their degree of preparedness to carry settlement loads.
The effectiveness with which a troublesome part of the
settlement problem is dealt with will depend to a high degree upon
the extent to which the contracting agencies can delegate authority
to the prime contractors to settle claims under subcontracts. At
the present time, practice varies among the contracting agencies.
The Maritime Commission, on application to its Settlement Review
Board, may authorize contractors to settle claims under subcontracts,
if the claim does not exceed $5,000. War and Navy Department con-
tracting officres are permitted to authorize prime contractors to
settle terminated subcontracts when payments of not more than $10,000
(without deducting disposal credits) are to be made. Such authoriza-
tions are dependent on a finding that the prime contractor will give
adequate review to subcontractors' claims. With respect to net claims
of under $1,000 when the subcontractor retains or disposes of all
inventory, the provisions of Regulation 6 of the Office of Contract
Settlement apply to all contractors.
24a
Regraded Unclassified
APPENDIX B
222
REGULATIONS AND FORMS
Exhibit
Page
we
I
Office of War Mobilization Director Order 2 and Uniform
-10-
Termination Article for Fixed-Price Supply Contracts.
Subject: Uniform Termination Article
II
Office of War Mobilization Directive Order 3.
-7b-
Subject: Pricing Policy on Termination Inventory
III
Office of War Mobilization Directive Order 4.
-9b-
Subject: Interpretations of Uniform Termination Article
IV
Office of War Mobilization Directive Order 5.
-11b-
Subject: Settlement Organization of Agencies
V
Office of Contract Settlement Regulation 1.
-17b-
Subject: Termination Loans
VI
Office of Contract Settlement Regulation 2 and Standard
-33b-
Application for Partial Payment.
Subject: Partial Payments
VII
Office of Contract Settlement Regulation 3.
-39b-
Subject: Pre-Termination Settlement Agreements
VIII
Office of Contract Settlement Regulation 4.
-41b-
Subject: Plant Clearance
IX
Office of Contract Settlement Regulation 5.
-47b-
Subject: Cost Principles
X
Office of Contract Settlement Regulation 6.
-51b-
Subject: Settlement of Subcontractors Claims
XI
Office of Contract Settlement Regulation 7.
-59b-
Subject: Fair Compensation
XII
Office of Contract Settlement Regulation 8 and Standard
-69b-
Settlement Proposal Forms.
Subject: Standard Settlement Proposals
XIII
Uniform Statistical Reporting Forms.
-87b-
Office of War Mobilization Directive Orders 1 and 6, issued respectively
January 8, 1944 and May 29, 1944, are not reproduced in this Appendix as
directives of the Office of War Mobilization since they are contained in
Directive Order 2 of the Office of War Mobilization and Regulations 5 and 6
of the Office of Contract Settlement.
-b-
Regraded Unclassified
OFFICE OF WAR MOBILIZATION
273
DIRECTIVE ORDER 2
February 24, 1944
At the time of the issuance by this Office of the Directive Order
to all Procurement Agencies dated January 8, 1944, which made effective a
Uniform Termination Article for Government Fixed Price war supply contracts,
it was stated that certain exceptions thereto were under consideration.
The Directive Order accordingly required that situations in which it was
deemed impracticable to use the Article should be reported to this Office
for further instructions. Such reports having been made, that Order is
hereby amended to include the following provisions in order to make ef-
fective certain exceptions recommended by the Joint Contract Termination
Board:
1. The Uniform Termination Article for Fixed Price Supply
Contracts, providing for termination at the option of the Government,
(which was promulgated by the Office of War Mobilization in its Directive
Order of January 8, 1944, and which incorporates by reference the State-
ment of Principles for Determination of Costs Upon Termination of Govern-
ment Fixed Price Supply Contracts) will be used, from the dates fixed as
provided in paragraph 2 below, by the War, Navy and Treasury Departments,
the Maritime Commission, Defense Plant Corporation, Defense Supplies
Corporation, Metale Reserve Company, Rubber Reserve Company and Foreign
Economic Administration, in all fixed price contracts made by them for
the manufacture in continental United States of War supplies and equip-
ment, unless exempted by the Office of War Mobilization prior to the
execution of the contract; provided that any such department or agency
may elect not to use the Article in any of the following classes of
contracts:
B. Contracts for an amount of less than $50,000 regardless
of the date of delivery;
b. Contracts for an amount of less than $500,000 providing
for delivery within six months;
C. Letters of intent and other preliminary contractual
arrangements which contemplate the subsequent execution of
formal contracts;
d. Contracts of Governmental departments, agencies and
instrumentalities with instrumentalities of the Covernment or
with States or subdivisions or instrumentalities thereof;
8. Contracts for the purchase of a material which is
manufactured either 88 a by-product or 8 co-product in an
integrated operation from a common raw material source in
such manner that the cost. of its manufacture is not sue-
ceptible of separate determination;
-1b-
Regraded Unclassified
f. Contracts or purchase orders . made in the name of and
on behalf of the Government, by a contractor under B cost or
cost plus contract with the Government, for the purchase of
materials, supplies and equipment required for or in connec-
tion with the construction of Government owned plante and
facilities;
B. Contracts, including so-called pool ordors and com-
mitment contracts, for the production of materials, supplies,
and equipment which provide that completed items produced
under the contract and furnished to the Government shall be
paid for at 8 price intended to exclude profit;
h. Requirement or open end contracts.
2. The article will be used by the above mentioned agencies
and departments in all contracts executed more than thirty days after
the publication of the Article and Statement by the ticular depart-
ment or agency, which publication shall take place as soon aa practi-
cable. The earlier use of the Article is optional with the department
or agency.
3. Each of the above mentioned departments or agencies will
give to holders of existing contracts (exclusive of those within any
classes excepted under paragraph la to h) the earliest practicable
opportunity, by regulation or otherwise, to amend their contracts to
include the Article, in substitution for any existing provision for
termination thereof without regard to default and for the convenience
or at the option of the Government.
4. Any other department or agency of the Government con-
tracting for the manufacture of war supplies and equipment in con-
tinental United States under fixed price contracts will use the Article
in such contracts wherever it deems such use to be feasible.
JAMES F. BYRNES
Director, Office of War Mobilization
THE WHITE HOUSE,
February 24, 1944.
NOTE: Directive No. 2 of the Office of War Mobilization in effect super-
seded Directive Order No. 1 which ie therefore not reproduced. Directive
Order No. 2 was in turn amended by Regulation No. 5 of the Office of
Contract Settlement. The Uniform Termination Article referred to in
paragraph 1 of Directive Order No. 2 18 as follows:
-26-
Regraded Unclassified
224
UNIFORM TERMINATION ARTICLE FOR FIXED PRICE SUPPLY CONTRACTS
"Article termination at the option of the Government: (a) The
performance of work under this contract may be terminated by the Govern-
ment in accordance with this article in whole, or from time to time in
part, whenever the contracting officer shall determine any such termina-
tion 18 for the best interests of the Government. Termination of work
hereunder shall be effected by delivery to the contractor of a notice
of termination specifying the extent to which performance of work under
the contract shall be terminated, and the date upon which such termina-
tion shall become effective. If termination of work under this contract
18 simultaneous with, a part of, or in connection with, a general termi-
nation (1) of all or substantially all of 8 group or class of contracts
made by the Department for the same product or for closely related prod-
ucts, or (2) of war contracts at, about the time of, or following, the
cessation of the present hostilities, or any major part thereof, such
termination shall only be made in accordance with the provisions of this
article, unless the contracting officer finds that the contractor 18 then
in gross or wilful default under this contract.
"(b) After receipt of 8. notice of termination and except as
otherwise directed by the contracting officer, the contractor shall (1)
terminate work under the contract on the date and to the extent specified
in the notice of termination; (2) place no further orders or subcontracts
for materials, services or facilities except as may be necessary for com-
pletion of such portions of the work under the contract as may not be
terminated; (3) terminate all orders and subcontracts to the extent that
they relate to the performance of any work terminated by the notice of
termination; (4) assign to the Government, in the manner and to the ex-
tent directed by the contracting officer, all of the right, title, and
interest of the contractor under the orders or subcontracts 80 terminated;
(5) settle all claims arising out of such termination of orders and sub-
contracts with the approval or ratification of the contracting officer to
the extent that he may require, which approval or ratification shall be
final for all the purposes of this article; (6) transfer title and deliver
to the Government in the manner, to the extent and at the times directed
by the contracting officer (1) the fabricated or unfabricated parts, work
in process, completed work, supplies, and other material produced as 8
part of, or acquired in respect of the performance of, the work terminated
in the notice of termination, and (11) the plans, drawings, information,
and other property which, if the contract had been completed, would be re-
quired to be furnished to the Government; (7) use his best efforts to sell
in the manner, to the extent, at the time, and at the price or prices directed
or authorized by the contracting officer, any property of the types referred
to in subdivision (6) of this paragraph; provided, however, that the con-
tractor (1) shall not be required to extend credit to any purchaser and (11)
may retain any such property at a price or prices approved by the contrac-
ting officer; (8) complete performance of such part of the work as shall not
have been terminated by the notice of termination; and (9) take such action
as may be necessary or as the contracting officer may direct for protection
and preservation of the property, which is in the possession of the contrac-
tor and in which the Government has or may acquire an interest.
-2b-
Regraded Unclassified
"(c) The contractor and the contracting officer may agree upon
the whole or any part of the amount or amounts to be paid to the con-
tractor by reason of the total or partial termination of work pursuant
to this article, which amount or amounts may include 8 ressonable al-
lowance for profit, and the Government shall pay the agreed amount or
amounts. Nothing in paragraph (a) of this article prescribing the
amount to be paid to the contractor in the event of failure of the con-
tractor end the contracting officer to agree upon the whole amount to
be paid to the contractor by reason of the termination of work pursuant
to this article shall be deemed to limit, restrict, or otherwise deter-
mine or affect the amount or amounts which may be agreed upon to be paid
to the contractor pursuant to this paragraph (c),
"(d) In the event of the failure of the contractor and contract-
ing officer to agree as provided in paragraph (c) upon the whole amount
to be paid to the contractor by reason of the termination of work pur-
evant to this article, the Government, but without duplication of any
amounts agreed upon in accordance with paragraph (c), shall pay to the
contractor the following amounts:
"(1) For completed articles delivered to and accepted by the
Government (or sold or retained as provided in paragraph (b) (7) above)
and not theretofore paid for, forthwith a sum equivalent to the aggre-
gate price for such articles computed in accordance with the price or
prices specified in the contract;
"(2) In respect of the contract work terminated as permitted
by this article, the total (without duplication of any items) of (1)
the cost of such work exclusive of any cost attributable to articles
paid or to be paid for under paragraph (a) (1) hereof; (11) the cost of
settling and paying claims arising out of the termination of work under
subcontracts or orders as provided in paragraph (b) (5) above, exclusive
of the amounts paid or payable on account of supplies or materials de-
livered or services furnished by the subcontractor prior to the effective
date of the notice of termination of work under this contract, which
amounts shall be included in the cost on account of which payment 18 made
under subdivision (1) above; and (111) a sum equal to --- percent of
the part of the amount determined under subdivision (1) which represents
the cost of articles or materials not processed by the contractor, plus
a sum equal to percent of the remainder of such amount, but the
aggregate of such sums shall not exceed 6 percent of the whole of the
amount determined under subdivision (1) which for the purpose of this
subdivision (111) shall exclude any charges for interest on borrowings;
"(3) The reasonable cost of the preservation and protection of
property incurred pursuant to paragraph (b) (9) hereof; and any other
reasonable cost incidental to termination or work under this contract, in-
cluding expense incidental to the determination of the amount due to the
contractor aa the result of the termination of work under this contract.
Not to exceed 2 percent.
To be established at a figure which 18 fair and reasonable under the
circumstances.
-4b-
Regraded Unclassified
225
"The total sum to be paid to the contractor under subdivisions
(1) and (2) of this paragraph (a) shall not exceed the total contract
price reduced by the amount of payments otherwise made and by the contract
price of work not terminated. Except for normal spoilage and to the ex-
tent that the Government shall have otherwise expressly assumed the risk
of loss, there shall be excluded from the amounts payable to the contractor
88 provided in paragraph (a) (1) and paragraph (d) (2) (1), all amounts
allocable to or payable in respect of property, which is destroyed, lost,
stolen, or damaged 80 as to become undeliverable prior to the transfer
of title to the Government or to a buyer pursuant to paragraph (b) (7) or
prior to the 60th day after delivery to the Government of an inventory
covering such property, whichever shall first occur.
"(e) The obligation of the Government to make any payments
under this article: (1) shall be subject to deductions in respect of
(1) all unliquidated partial or progress payments, payments on account
theretofore made to the contractor and unliquidated advance payments,
(11) any claim which the Government may have against the contractor in
connection with this contract, and (111) the price agreed upon or the
proceeds of sale of any materials, supplies, or other things retained
by the contractor or sold, and not otherwise recovered by or credited
to the Government, and (2) in the discretion of the contracting officer
shall be subject to deduction in respect of the amount of any claim of
any subcontractor or supplier whose subcontract or order shall have been
terminated 88 provided in paragraph (b) (3) except to the extent that such
claim covers (1) property or materials delivered to the contractor or (11)
services furnished to the contractor in connection with the production of
completed articles under this contract.
"(f) In the event that, prior to the determination of the final
amount to be paid to the contractor as in this article provided, the con-
tractor shall file with the contracting officer 8 request in writing that
an equitable adjustment should be made in the price or prices specified
in the contract for the work not terminated by the notice of termination,
the appropriate fair and reasonable adjustment shall be made in such price
or prices.
"(g) The Government shall make partial payments and payments on
account, from time to time, of the amounts to which the contractor shall
be entitled under this article, whether determined by agreement or other-
wise, whenever in the opinion of the contracting officer the aggregate of
such payments shall be within the amount to which the contractor will be
entitled hereunder.
"(h) For the purposes of paragraphs (a) (2) and (a) (3) hereof,
the amounts of the payments to be made by the Government to the contractor
shall be determined in accordance with the statement of principles for
determination of costs upon termination of Government fixed-price supply
contracts approved by the Joint Contract Termination Board, December 31,
1943. The contractor for a period of 3 years after final settlement under
-5b-
Regraded Unclassified
the contract shall make available to the Government at all reasonable
times at the office of the contractor all of its books, records, docu-
ments, and other evidence bearing on the costs and expenses of the con-
tractor under the contract and in respect of the termination of work
thereunder."
NOTE: The foregoing Article incorporates by reference in paragraph (h)
a statement of principles for determination of costs upon termination
of Government fixed-price supply contracts. This statement was amended
by Regulation 5 of the Office of Contract Settlement and is reproduced
as amended, with an explanation of the amendments, as part of Exhibit
VIII.
-6b-
Regraded Unclassified
APPENDIX B - EXHIBIT II
226
OFFICE OF WAR MOBILIZATION
DIRECTIVE ORDER 3
The following resolution passed by the Joint Contract Termination
Board is hereby made effective:
The Joint Contract Termination Board, acting by agree-
ment among its members and pursuant to Executive Order 9347,
dated May 27, 1943, is concerned with all aspects of the ter-
mination of war contracts and the subsequent settlement with
war contractors, including the rapid disposition of property
by or to contractors in connection therewith. It recognizes,
however, that the price policies employed in the disposition
of termination inventories by owning agencies or by contractors,
prior to their declaration as surplus, bear an important relation
to the price policies to be employed in the disposition of similar
property which has been or may be declared surplus, and that a
single agency should coordinate such price policies. Accordingly,
the Joint Contract Termination Board hereby delegates to the
Surplus War Property Administration all authority possessed by
the former to determine, and to promulgate by regulation or
otherwise, price policies to be followed by Government agencies
or by contractors under their authority in the disposal of any
article, commodity, machinery, equipment, accessory, part, com-
ponent, assembly, work in process, or any product of any kind
allocable to a terminated war contract and of any machinery or
equipment owned by the Government becoming available for dis-
position in connection with contract terminations.
Director, Office of War Mobilization
May 2, 1944.
-7b-
Regraded Unclassified
227
APPENDIX B - EXHIBIT TII
OFFICE OF WAR MOBILIZATION
DIRECTIVE ORDER 4
The Uniform Termination Article for Government Fixed Price war
supply contracts was made effective by directive order from this office
dated January 8, 1944. To the end of securing uniformity and certainty
in the interpretation and operation of the Article, the following gen-
eral policy determinations, with respect to it, which have been approved
by the Joint Contract Termination Board, are hereby made effective:
1. Paragraph (b) (4) of the Article provides that the prime con-
tractor shall assign to the Government, in the manner and to the extent
directed by the contracting officer, all of the right, title and interest
of the prime contractor under the orders or subcontracts terminated by
reason of their relationship to the work terminated by the termination
notice. This provision was designed to assure the Government's right
to require the transfer to it of the property and rights under the sub-
contract or order acquired by the prime contractor from his subcontractors
through payments for which the prime contractor ie reimbursed by the
Government. Accordingly, paragraph (b) (4) is not to be construed as re-
quiring transfer to the Government of other rights of the prime contractor
against the subcontractor (such as set-offs or counterclaims) for which no
Government reimbursement ie made to the prime contractor. In this con-
nection it was recognized in the preparation of the Article that uniform
provisions could not be drawn which would provide adequately in all cases
for the disposition of patent rights involved in prime contracts or sub-
contracts, and the Article 18 not intended to forbid the inclusion in
contracts of separate provisions covering the disposition of such rights
on termination.
2, Paragraph (a) (1) of the Article provides that, in the case of
a formula settlement, the contractor will be paid in accordance with the
price or prices specified in the contract for. completed articles delivered
to and accepted by the Government (or sold or retained by the contractor
under the provisions of the contract). Paragraph (b) (6) requires the
contractor to transfer title and deliver to the Government, in the manner,
to the extent and at the times directed by the contracting officer, com-
pleted work and other property; and paragraph (b) (7) requires the con-
tractor to use his best efforts to sell any such property in the manner,
to the extent, at the time and at the price or prices directed or author-
ized by the contracting officer.
It was the intent of these provisions, considered together, to re-
quire the Government, at times determined by the contracting officer in
accordance with applicable regulations, to accept delivery of all ar-
ticles (which do not represent unreasonable anticipation of production
schedules) completed in accordance with the provisions of the contract
-9b-
Regraded Unclassified
which the contractor had not previously sold or agreed to retain. In the
case of a formula settlement, therefore, all such completed articles will
be paid for at the contract price in accordance with the provisions of
paragraph (a) (1), rather than at their cost in accordance with the pro-
visions of paragraph (a) (2),
3. Paragraphs (b) (3) and (b) (5) of the Article require the con-
tractor to terminate all orders or subcontracts to the extent that they
relate to the performance of any work terminated by the notice of termi-
nation; and to settle all claims arising out of such termination of
orders and subcontracts, with the approval or ratification of the con-
tracting officer to the extent that he may require, which approval or
ratification shall be final for all purposes of the Article. Paragraph
(a) (2) (11) then provides that the Government shall pay to the con-
tractor, among other amounts, the cost of settling and paying claims
arising out of the termination of work under subcontracts and orders 88
provided in paragraph (b) (5).
The Article does not include any provision (corresponding to those
occasionally used by one or more of the contracting agencies prior to
the effective date of the Article) that, under certain circumstances,
final judgments secured by subcontractors against prime contractors in
courts of competent jurisdiction were to be regarded as determinations,
binding upon the Government, of the amount of the obligation owing by
the prime contractor to the subcontractor. The ommission of such 8 pro-
vision was not intended to detract from the binding effect of such judg-
mente. In the case of any subcontract which does not contain unusual
termination provisions unreasonably increasing the common law rights of
the subcontractor, and in which the prime contractor, after making un-
successful efforts to settle with his subcontractor, is sued in a court
of competent jurisdiction, gives prompt notice to the contracting agency
involved and offers to the agency control of the defense of the suit,
the agency should accept any final Judgment as determining the amount of
the obligation between the parties to the suit, and as fixing the amount
of the Government's obligation to reimburse the prime contractor, to the
extent that the subcontract is properly allocable to the prime contract.
The propriety of this allocation remains for the determination of the con-
tracting agency.
4. Paragraph (e) (2) of the Article provides that the obligation of
the Government to make payments under the Article shall, with certain ex-
ceptions, be subject, in the discretion of the contracting officer, to de-
duction in respect of the amount of any claim of any subcontractor or sup-
plier whose subcontract or order shall have been terminated. The purpose
of this provision was to permit the withholding of sums owing by the prime
contractor to his subcontractors, in order to assure their receipt by the
subcontractor. In any case in which use is made of this provision, the
prime contractor 1e entitled to have the withheld sum applied for his ben-
efit in such a way as to exonerate him, to that extent, from the claim of
the subcontractor.
Director, Office of War Mobilization
May 2, 1944.
-1Cb-
Regraded Unclassified
228
APPENDIX B - - EXHIBIT IV
OFFICE OF WAR MOBILIZATION
DIRECTIVE ORDER 5
The statements of policy adopted by the Joint Contract Termination
Board as to Government Organizations for Settlement of Terminated War
Contracts, and 88 to Review of Contract Termination Settlements are
hereby made effective for use by the War, Navy and Treasury Departments,
the Maritime Commission, Smaller War Plants Corporation, Defense Plant
Corporation, Defense Supplies Corporation, Metals Reserve Company, Rubber
Reserve Company and Foreign Economic Administration. Other departments
or agencies of the Government administering the settlement of terminated
war contracts will follow the statements of policy to the extent they
deem it practicable to do so.
/8/ James F. Byrnes
Director, Office of War Mobilization
May 2, 1944.
-11b-
Regraded Unclassified
STATEMENT OF POLICY AS TO GOVERNMENT ORGANIZATIONS
FOR SETTLEMENT OF TERMINATED WAR CONTRACTS
Part I. General Principles
1. Simplification and perfection of procedures will not alone
suffice to bring about speedy and fair settlements of terminated war
contracts. The Government and industry must have organizations adequate,
both quantitatively and qualitatively, to handle termination settlements,
and the Government in particular must establish means for coordinating
the activities of its various agency organizations.
2. Within the Government the principle must obtain that each settle-
ment organization should freely utilize the services and facilities of
other settlement organizations better situated to do particular jobs.
Each organization should also have access to information obtained by
other organizations in their settlement activities. Maximum and most
effective utilization of the Government's settlement organizations as 8.
whole requires a high degree of cooperation among the several agencies
and of coordination within each agency.
3. There must be constant surveillance by each agency of the opera-
tions of its own organization. There must likewise be a continuing ef-
fort, through a central body, to maintain uniform policies and procedures
of general application and to promote the joint utilization of personnel,
information, and experience of all agency organizations. Only in these
ways can satisfactory results be assured.
Part II. Procuring Agency Organization
4. Control Organizations. Each procuring agency should establish
a supervisory organization within the agency, or should designate for the
purpose responsible officials of the agency, to be charged in either case
with the responsibility for seeing that the policies established for all
procuring agencies are carried out. The functions of such organization or
officials should be to supervise the termination activities within the
agency to the extent necessary to insure prompt and equitable settlement
of terminated contracts, to maintain close contact with the Joint Con-
tract Termination Board, to submit to the Board problems of the agency
which involve policies of major importance to the Government or as to
which uniformity of action on the part of the several procuring agencies
is desirable, and to implement the regulations of the Board by the 18-
suance of detailed regulations governing the termination of contracts
and their settlement within the agency.
5. Collection of Information. It should be the responsibility of the
designated organization or officials to maintain current information 88 to
the termination settlements in process within the agency, the personnel
-12.b-
Regraded Unclassified
available for any work incident to such settlements, and the progress
made from time to time in terms of settlements effected. Information as
223
to available personnel should be maintained in such manner as to facili-
tate the temporary assignment of technical personnel to related work in
connection with other settlements within the agency or by other agencies,
and such information should be made available to other agencies upon re-
quest 88 needs arise.
Part III. Organization at the Negotiating Level
6. Contracting Officers and Technical Staffs. In all contract re-
lations the Government must act through an agent, usually called the con-
tracting officer, who signs settlement agreements and other documents on
behalf of the Government. In Government corporations, which operate
through officers and agents responsible to boards of directors, the for-
malities differ somewhat. In both types of organization, however, there
is an individual or a group of individuals who must have the primary
responsibility for the prompt and equitable settlement ofterminated con-
tracts. Such responsible officials must have assistance in all cases
from technical staffe, consisting ordinarily of legal, accounting, prop-
erty disposal, and other specialists. It is the responsibility of each
procuring agency to see that adequate technical assistance of this kind
18 afforded to the responsible officials and 18 utilized by them.
7. Joint Utilization of Technical Staffs. In 8 number of instances
it will be feasible to assign technical personnel directly to the plants
or companies having major termination problems, to work with such plants
or companies on a full-time basis and to report to responsible settlement
officers. All agencies should utilize such assigned personnel to the
greatest practicable extent to avoid duplication. There should be similar
utilization of personnel not regularly assigned on 8 full-time bacis but
already engaged in making other settlements with the same plant or company,
where common elements of claims or other factors offer advantages.
8. Use of Procurement Organizations. Full use of the personnel of
procurement organizations, including that of procurement offices in the
field, should be made to the greatest extent feasible without interference
with procurement operations. Such use 1e especially important in cases
where a new contract will take the place of one that has been terminated,
BO as to integrate the two transactions.
9. Property Disposal Organizations. The settlement of terminated
contracts and the disposition of property allocable thereto are related
but separate functions requiring operating personnel experienced in
widely different fields. Whether property disposal specialists are to
operate under the control of contracting officere or under separate
organizations within the procuring agency is to be determined by the
agency concerned and depends largely upon the volume of property involved,
the magnitude of the problems presented, and the requirements of good
administration.
-13b-
Regraded Unclassified
10. Decentralization. Many of the operations preliminary to the
negotiation of settlement agreements will necessarily be performed by
field personnel. In deciding to what extent authority for termination
settlements should be decentralized, each procuring agency must consider
not only the convenience of contractors and the interests of speedy settle-
ment but the judicious use of its qualified personnel.
Approved May 2, 1944.
Director, Office of War Mobilization
-14b-
Regraded Unclassified
STATEMENT OF POLICY AS TO REVIEW OF
230
CONTRACT TERMINATION SETTLEMENTS
General Principles
1. The policy of the Joint Contract Termination Board is to en-
courage the fullest practicable use of negotiation as the method of
settling terminated contracts in the interest of speed in settlement and
fairness to both parties. Each procuring agency shall make every reason-
able effort to arrive at negotiated settlements and shall endeavor at all
times to guard against the failure of negotiations because of arbitrary
or erroneous decisions by individuals authorized to represent the agency
in settlement negotiations. Settlement agreements once made should be
final and not subject to reopening except for fraud.
2. A proper degree of control over such settlements must, however,
be provided for the protection of the Government's interests. The re-
view procedure set forth below 1e designed to provide the minimum stand-
ards to be observed by all procuring agencies. To the extent that it
may be feasible to do BO without materially slowing the settlement process,
procuring agencies may extend the controls afforded by the review pro-
cedure beyond the requirements of these minimum standards. The primary
objective of promptness in settlement must not be lost sight of, and
review of smaller settlements must not be required at the expense of that
objective.
Scope and Applicability
3. The terms "procuring agency" and "agency", as used in this state-
ment of policy, refer specifically to the War, Navy and Treasury Depart-
ments, The Maritime Commission, Defense Plant Corporation, Defense Sup-
plies Corporation, Metals Reserve Company, Rubber Reserve Company, and
Foreign Economic Administration.
4. The policies and procedures set forth herein shall apply to war
contracts terminated other than for default. Any agency, however, may
exempt from such policies and procedures contracts in any of the follow-
ing categories:
(a) Contracts with instrumentalities of the Government or
with States, Territories or possessions of the United
States or instrumentalities thereof;
(b) Contracts with a foreign government;
(c) Contracts to be substantially performed outside the
territorial limite of the continental United States.
Administrative Review
5. Each procuring agency shall establish one or more settlement
review boards, which shall be decentralized to the maximum practicable
-15b-
Regraded Unclassified
extent. No negotiated bettlement agreement providing for payment to any
prime contractor, or to any subcontractor, of an amount in excess of
$50,000, as determined in paragraph 6 below, shall be permitted to become
binding upon the Government until the proposed settlement has been reviewed
and approved by such a board or, in the event of its disapproval, until ap-
proved by the head of the procuring agency or such representative as he may
designate for that purpose. More than one such approval shall not be re-
quired generally with respect to any settlement agreement, but this shall
not prevent any procuring agency from providing such headquarters review
as it may deem desirable in the case of exceptionally large settlements.
Contracting officers may be permitted to submit for such review and ap-
proval as the procuring agency may specify any proposed settlement agree-
ments which they consider doubtful. Property disposal boards, if estab-
lished within the agency, may be utilized in lieu of settlement review
boards for the review of property disposal transactions involved in settle-
ments.
6. In determining for review purposes whether any proposed settle-
ment of a prime contract or of a subcontract exceeds $50,000, any amounts
credited on account of the disposition of property shall not be deducted
from the amount of the settlement, but there shall be excluded (1) amounts
payable for completed articles or work at the contract price, and (2)
amounts payable for the discharge of all claims of subcontractors or sup-
pliers under such prime contract or subcontract, as the case may be.
7. In the case of terminated cost plus fixed fee prime contracts
and terminated cost plus subcontracts where reimbursement of the costs is
made after appropriate audit, the foregoing rules will be inapplicable.
Each procuring agency shall, however, prescribe such requirements in
respect to the review of adjustments in fixed fees as it deems desirable.
8. It shall be the function of settlement review boards to determine
the over-all ressonableness of proposed settlements from the standpoint of
protecting the Government's interests. Such boards may act upon records
submitted by contracting officers or may require the submission of addi-
tional information.
Approved May 2, 1944.
Director, Office of War Mobilization
-16b-
Regraded Unclassified
APPENDIX 8 EXHIBIT y
OFFICE OF CONTRACT SETTLEMENT
231
WASHINGTON, D. C.
August 18, 1944
GENERAL REGULATION NO. 1
Pursuant to the authority conferred upon me by Sections 4(b) and 8(c) of the Contract Settlement Act of 1944, I hereby
prescribe the procedure for the guaranteeing of termination loans by the War Department, the Navy Department and the
Maritime Commission through the Federal Reserve Banks, outlined in the Guarantee Agreement, the Loan Agreement, and
Explanatory Notes attached hereto as exhibits A, B, and C, respectively.
Technical amendments not affecting policy may be made in exhibits B and C by agreement among the War and Navy
Departments, the Maritime Commission and the Federal Reserve Board.
In the execution of this procedure the following policies will be observed:
1. Termination loan (hereinafter called T-Loan) guarantees should not be refused by the contracting agency having the
preponderant interest in the borrower's war contracts if the borrower is or has been engaged in performing an opera-
tion connected with or related to war production, except in such classes of cases as may be prescribed by the Director.
The borrower's certification of his investment in termination inventories and receivables and of the amounts payable
to subcontractors should not be questioned by the Federal Reserve Bank or the contracting agency unless there is reason
to believe that it is substantially overstated in value. Financing institutions should be encouraged to make unguar-
anteed production and termination loans, and the fact that a financing institution has made such an unguaranteed loan
shall not affect its right subsequently to apply for a T-Loan guarantee, even if the proceeds of the T-Loan are used to
retire the existing loan.
2. If a contracting agency which utilizes the Federal Reserve Banks as fiscal agents for T-Loan guarantees has local
representatives in connection therewith, it should delegate to such banks authority to approve, after consultation with
and in the absence of objection by such representatives, all applications for guarantees of loans totaling (a) $500,000 or
less to any one borrower when the requested percentage of guarantee is not in excess of 90 per cent, and (b) $100,000
or less to any one borrower when the requested percentage of guarantee is not in excess of 95 per cent. Any such
contracting agency which does not have such local representatives will provide them in the localities where, and at the
times when, it is determined that they are required, in the light of its prospective volume of contract terminations and
after consultation with the Director, and in the absence of such representatives should delegate such authority to the
Reserve Banks as is necessary to insure prompt processing of applications for and execution of such guarantees.
3. Conditions other than those required under the standard loan agreement should be prescribed by the contracting
agencies or the Federal Reserve Banks only in exceptional circumstances and when they are clearly necessary to pro-
tect the Government's interest. Additional conditions agreed upon by the borrower and the financing institution, if not
unreasonable and not inconsistent with the standard loan agreement, should not be objected to by the contracting
agency or the Reserve Banks.
4. The requested percentage of guarantee should not ordinarily be questioned by the Federal Reserve Bank or the
contracting agency if it does not exceed 90 per cent; and a contracting agency should not authorize a percentage of
guarantee in excess of 90 per cent, or 95 per cent in the case of small loans, unless the circumstances clearly justify
the financing institution in requesting it and other means of interim financing are not promptly available.
5, In general, the percentages in the loan formula certificate agreed upon by the financing institution and the borrower
should not be questioned by the Federal Reserve Bank or the contracting agency. After consultation with the Board of
Governors of the Federal Reserve System, the contracting agencies will, to the extent practicable, specify general
criteria or standard maximums which may be employed in typical classes of cases.
(Signed) ROBERT H. HINCKLEY
Robert H. Hinckley
Director
-176-
Regraded Unclassified
APPENDIX 1. EXHIBIT
232
Form of Deptember 1. 2044
APPLICATION
By
FINANCING INSTITUTION
FOR T (TERMINATION) LOAN GUARANTEE
To Federal Reserve Bank of
# Fiscal Agent of the United States
(Date)
1. Name and location of financing institution:
2. Name and location of prospective borrower:
3. Maximum principal amount of loan:
4. Specify or describe war contracts excepted from initial assignment of collateral pursuant to Paragraph 5
of Loan Agreement: (See Explanatory Note No. 28.)
5. Present indebtedness of borrower to financing institution, if any, and statement as to whether it is pro-
posed to refund such indebtedness:
6. If a substantial portion of the stock of borrower or of financing institution is controlled by the other, or a
substantial portion of the stock of both is controlled by the same interests, or if there are any officers or
directors common to both, describe such relationship briefly.
7. Each copy of application should be accompanied by:
(a) copy of the proposed guarantee agreement and loan agreement, including exhibits,
(b) copy of balance sheet and operating statement for latest fiscal period certified by borrower (audited
statements to be furnished if available),
(c) copy of latest available balance sheet and operating statement since close of fiscal period.
-19b-
Regraded Unclassified
8. (a) If borrower is a PRIME Government war contractor, give the following information with respect to
each prime contract:
Govt. agency
Is contract a fixed
Uncompleted
Estimated
with which
Date
Contract
price contract?
amount of
claims on
Nature
of
prime contract
number
Cost plus fixed
unterminated
terminated
of
is held
contract
fee contract?
contracts
contracts
product
-20b-
Regraded Unclassified
233
8. (b) If borrower is & SUBCONTRACTOR, give the following information with respect to each subcontract:
Govt. agency for which
Uncompleted
Name and address
Subcontract
products are being
amount of
Estimated claims
Nature
of concern issuing
or purchase
provided and prime
unterminated
on terminated
of
subcontract
order number
contract number
subcontracts or
subcontracts or
product
if known
purchase orders
purchase orders
-21b-
Regraded Unclassified
9. Statement of financing institution's opinion or belief with respect to each of the following:
(a) whether borrower's general war production record has been satisfactory with special reference to rejec-
tion experience,
(b) borrower's general character and reputation,
(c) adequacy of accounting records and inventory control,
(d) unusual aspects of financial statements, and
(e) other information which financing institution would ordinarily take into account in considering a loan
to borrower, including respects, if any, in which borrower's financial background has been unsatisfactory.
(Attach rider, if space inadequate)
10. Borrower has been advised that financing institution is applying for this guarantee in the amount and sub-
ject to the terms indicated in the proposed loan agreement.
(Full name of financing institution)
By
(Signature)
(Title)
-22b-
Regraded Unclassified
274
APPENDIX # - EXHIBIT V-I
Fax of September 1, 1964
T-LOAN GUARANTEE AGREEMENT
No.
The
(herein called "Guarantor"),
acting through the Federal Reserve Bank of
fiscal agent of the United States (herein called "Reserve Bank"), and the Financing Institution hereby agree -
follows:
Bection 1. Definitions.
(A) "Financing Institution" shall mean
(B) "Borrower" shall mean
(Name)
of
(Address)
(C) "The loan" shall mean the financing arrangement between the Financing Institution and the Borrower which
la described in Appendix I annexed hereto. In case of any conflict or inconsistency between the provisions of this
agreement and the provisions of Appendix I or any other similar instrument, the provisions of this agreement shall
control.
(D) "Obligation" shall mean the instrument or instruments evidencing the Borrower's indebtedness under the
loan.
(E) "Guaranteed percentage" shell mean
/
Section 2. Guaranies as to Sharing of Louise and Expenses.
(A) All losses on the loan (Le., all amounts of principal and interest which are due and unpaid), and all unreim-
bursed expenses as defined in Paragraph (B) of this section, shall be shared ratably, on the date of settlement, by
the Guarantor and the Financing Institution in accordance with the guaranteed and unguaranteed percentages, re-
spectively All net recoveries after the date of settlement shall be shared on the same basis. The date of settlement
shall be the thirtieth (30th) day after the date on which either party, after maturity of the loan, receives from the
other party 6. written request for such settlement, or any other date agreed on by the parties.
(B) Expenses shall mean all reasonable out-of-pocket expenses (including reasonable counsel fees incurred by
the Financing Institution or the Reserve Bank prior to but not after any purchase under this agreement) which
relate to the enforcement of the loan or the preservation of the collateral and which are incurred during the period
of any default in the payment of principal or interest.
Section 3. Agreement to Purchase.
The Guarantor will at any time and from time to time prior to the date of settlement purchase such portion of
the obligation as may be demanded in writing by the Financing Institution, by paying to the Financing Institution,
on the tenth (10th) day after the receipt by the Reserve Bank of such a demand, the unpaid principal amount of the
portion of the obligation to be purchased, as of the date of the demand, plus all unpaid accrued interest on such
amount, with appropriate adjustment for guarantee fees, computed as of the date of purchase; provided that in no
event shall the total amount of the portion of the obligation owned by the Guarantor exceed the guaranteed per-
centage.
Bection 4. Voluntary Purchase by Guarantor.
The Guarantor may, at any time upon its demand, purchase the guaranteed percentage of the obligation, less any
amounts previously purchased under this agreement and not repaid, and shall pay therefor on the basis stated in
section 3. In such event, at the option of the Financing Institution or the Guarantor, the Financing Institution shall
forthwith transfer possession of the obligation and collateral in the manner provided in section 5.
Section 5. Administration of Loan and Possession of Obligation and Collateral.
(A) The Financing Institution shall administer the loan until it transfers possession of the obligation and col-
lateral to the Reserve Bank as provided below, and thereafter the Guarantor shall administer the loan. Whenever
the Guarantor purchases any part of the obligation, the Financing Institution shall forthwith deliver to the Reserve
Bank a certificate evidencing the Guarantor's ownership interest in the obligation and collateral. In any such case,
however, upon written demand by the Reserve Bank, the Financing Institution shall forthwith transfer to the Re-
serve Bank, without recourse or warranty except as to the genuineness of the Borrower's signature to any instrument,
such possession of, title to, and rights to enforce the obligation and all collateral therefor as it may have. Thereupon
the Reserve Bank shall issue to the Financing Institution a certificate evidencing the Financing Institution's ownership
interest in the obligation and collateral. Either party administering the loan may (1) release and dispose of col-
Interal and proceeds thereof, and permit substitution therefor, all in accordance with the terms of the loan, and (2)
after five days' written notice to the other party, bring any action to enforce the loan.
(B) Nothing in this agreement shall prevent the Financing Institution from transferring the obligation as cul-
lateral for advances by & Federal Reserve Bank.
-23b-
Regraded Unclassified
Section 6. Ratable Application of Collections.
All amounts at any time paid or credited on the obligation, from whatever sources realized, shall be applied
ratably for the benefit of the Financing Institution and the Guarantor according to their respective ownership inter-
ests in the obligation. Except as may be provided in the loan, the Financing Institution shall not be required to
credit on the obligation the proceeds of any banker's lien or right of set-off with respect to funds of the Borrower
(exclusive of proceeds of contracts on Exhibit C to Appendix 1) or of other assets, to the extent that the Financing
Institution has provided that such lien, right of set-off or other assets shall be security for other indebtedness of the
Borrower to it.
Section 7. Fees Payable to Guarantor.
The Financing Institution shall pay to the Reserve Bank at the end of each monthly or quarterly period, as fixed
by the Reserve Bank, an amount equal to per cent of any interest payable by the Borrower on the aver-
age daily amounts of that part of the unpaid principal of the obligation which the Guarantor was obligated during
such period to purchase upon demand of the Financing Institution.
Section 8. Effect of Violation of Agreement.
(A) If the Financing Institution shall violate, or fail to comply with, any of the terms of this agreement or any
of the terms or conditions of the loan or shall through gross negligence make a material misrepresentation of fact in
the application therefor, or in anything constituting a part of the application, it shall become liable to the Guarantor
in an amount equal to the damages sustained by the latter by virtue of such violation, failure to comply, or mis-
representation; but the Guarantor shall not be relieved by such violation, failure to comply, or misrepresentation
from any of its obligations to the Financing Institution under this agreement.
(B) In the absence of gross negligence on the part of the Financing Institution, (1) no invalidity or ineffectiveness
of any collateral or of any assignment thereof accepted by the Financing Institution, and (2) no action or omission to
act on the part of the Financing Institution in reliance on a statement or certificate signed by an appropriate officer
or member of the Borrower with respect to the financial condition, business or operations of the Borrower, shall con-
stitute a violation of, or failure to comply with, any of the terms of this agreement or any of the terms or conditions
of the loan on the part of the Financing Institution. No invalidity of any provision of the loan arising from statute
or decision of any court shall in any way relieve the Guarantor hereunder.
Section 9. Officials Not to Benefit.
No member of or delegate to Congress or resident commissioner shall be admitted to any share or part of this
contract or to any benefit that may arise therefrom, but this provision shall not be construed to extend to this con-
tract if made with a corporation for its general benefit.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed on their behalf by their duly
authorized agents this
day of
. 194
(Guarantor)
By Federal Reserve Bank of
as Fiscal Agent of the United States.
(SEAL)
By
(Name)
(Title)
ATTEST:
(Financing Institution)
(Name)
(Title)
(Name)
(Title)
-24b-
Regraded Unclassified
225
APPENDIX I - EXHIBIT H
Pine of 1. INA
APPENDIX I
TERMINATION LOAN AGREEMENT
Under Guarantee Agreement No.
(herein called "Financing Institution") will grant credit to
of
(herein called "Borrower"), up to .
maximum principal amount of $
at any one time outstanding, by lending to the
Borrower at any time and from time to time on promissory notes in the form annexed hereto as Exhibit A and in
accordance with the terms and conditions of this agreement.
1. Definitions.-All terms defined in the Contract Settlement Act of 1944 and In the Guarantee Agreement shall
have the same meaning when used in this agreement. "Terminated war contract" shall mean a war contract, in Its
entirety, which has been terminated in whole or in part. "The Contracts" shall mean such terminated war con-
tracts, if any, as may now be listed on Exhibit C annexed, and 48 the Borrower may from time to time add thereto
by supplement approved by the Financing Institution.
2. Maturity-The loan shall mature thirty (30) days after final payment of the amounts due, upon final and con-
clusive settlement, on the war contracts of the Borrower or upon
194
which-
ever is earlier, and all notes issued hereunder shall thereupon become due and payable, If any note of shorter
maturity is issued, the Borrower may from time to time until the maturity of the loan again borrow hereunder the
unpaid amount of such note, subject to the provisions of Paragraph 8 hereof. The Borrower may at any time by
written notice reduce the maximum principal amount of the loan In multiples of 8
3. Interest-The Borrower shall pay interest as prescribed in Exhibit A.
4. Commitment Fee and Expenses-The Borrower shall pay quarterly a commitment fee at the rate of
per annum on the average daily unused balance of the maximum principal amount of the loan. The Borrower shall
reimburse the Financing Institution for reasonable out-of-pocket expenses Incurred in connection with the loan and
the application therefor.
5. Collateral-Prior to or contemporaneously with any borrowing hereunder, the Borrower, except and to the
extent that the Financing Institution otherwise agrees in writing, will assign to the Financing Institution as security
for the loan all moneys due and to become due on the Contracts. At any time upon request of the Financing In-
stitution or the Guarantor, the Borrower will furnish additional security by assigning to the Financing Institution
the moneys due and to become due on any or all of its terminated war contracts which by using its best efforts the
Borrower can assign and which have not been previously assigned hereunder, All proceeds of assignments made
hereunder and of any other collateral taken by the Financing Institution for the loan shall be applied to the indebt-
edness under the loan. Except to secure borrowings hereunder, except as provided in Exhibit D. and except to
secure partial payments made to the Borrower by any contracting agency, the Borrower will not (a) assign, or suffer
to remain assigned, moneys due or to become due on any of the Contracts, or (b) mortgage, pledge, or otherwise
encumber, or suffer to remain encumbered for more than
days, any inventory allocable to the Contracts.
6. Conditions of Borrowing--The Financing Institution shall not be required to make any advance hereunder
(a) unless the Borrower furnishes to the Financing Institution a loan formula certificate in the form annexed hereto
as Exhibit B, dated not more than days before the date of the proposed borrowing, which shows a borrow-
ing base, calculated in accordance with the percentages therein specified, of not less than the amount that will be
outstanding after the proposed borrowing, or (b) if any event exists which constitutes or which, except for notice or
lapse of time or both, would constitute a default specified in this agreement, or (c) to the extent that the Financ-
ing Institution has reason to believe that the borrowing base stated in the loan formula certificate is substantially
overstated in value and has so notified the Borrower in writing, provided that the Financing Institution may rely
upon the borrowing base shown in the loan formula certificate.
7. Reports-The Borrower shall maintain proper recurds and accounts, permit such Inspection thereof, and
furnish such statements and reports, including audit reports, as the Financing Institution or the Guarantor may from
time to time reasonably request. In any event, within three (3) months after the initial borrowing and not less than
follows: quarterly thereafter the Borrower shall furnish to the Financing Institution periodic reports in triplicate made up as
(a) A balance sheet, certified by an appropriate-officer or member of the Borrower, as of a date not more than
days prior to the date of furnishing the report.
(b) A loan formula certificate in the form of Exhibit B, dated not more than
days before the date of
furnishing the report, unless such a certificate has been furnished within thirty (30) days before such date.
(c) A statement of the nature, amounts, and dates of all payments on any assigned terminated war contracts and
on the Contracts, whether or not assigned, in cash or by offset or otherwise (except any offset theretofore deducted
in any loan formula certificate) between the date of the initial borrowing or the last date covered by the last
report, whichever is later, and a date not more than fifteen (15) days prior to the date of such a statement. Pay-
ments shall be deemed to include the proceeds of collateral taken for the loan, or proceeds of, or specific credit with
respect to, any sale, retention or other disposition of inventory allocable to such contracts, approved or authorized by
the proper authority, and the cost or proceeds, whichever is greater, of any such inventory which the Borrower has
definitively elected to retain without specific credit therefor.
8. Reduction of Notes-The Borrower shall pay down the unpaid principal amount of the notes by an amount
equal to: (a) All payments, as described in Paragraph 7(c), within three (3) days from the date of any such pay.
ment or within such further time as the Financing Institution may prescribe; and (b) any excess of outstanding
borrowings over the borrowing base shown in the most recent loan formula certificate, upon the date of furnishing
such certificate, provided that, while the Financing Institution may rely upon the borrowing base shown in such
certificate, such borrowing base shall be decreased to the extent that the Financing Institution or the Guarantor
has reason to believe that it is substantially overstated in value and has so notified the Borrower in writing, to
-25b-
Regraded Unclassifie
which event the Borrower shall pay, in addition, an amount equal to any excess resulting from such decrease,
within ten (10) days after the mailing of such notice.
9. Maintenance of Working Capital-The Borrower shall maintain net current assets, as determined in accordance
with generally accepted principles of accounting and including in current liabilities all borrowings outstanding
hereunder, of not less than $
10. Insurance-The Borrower shall maintain Insurance on its property in such amounts and against such risks
as is customarily maintained by similar businesses operating in the same vicinity.
11. Other Provisions-The parties hereto agree to any additional provisions appearing in Exhibit D annexed.
12. Events of Default-The occurrence of any one of the following events shall constitute a default hereunder:
(a) Any statement, representation, warranty, certificate, schedule or report furnished by the Borrower in connec-
tion with the loan shall prove to have been materially false at the date thereof.
(b) Nonpayment of the principal of any of the notes outstanding hereunder when due; or nonpayment of in-
terest or any commitment fee within ten (10) days after the due date thereof.
(c) Breach by the Borrower of any other provision of this agreement.
(d) The Borrower shall be adjudicated a bankrupt or a trustee or a receiver shall be appointed for the Bor-
rower or of a substantial part of its property in any involuntary proceeding, or any court shall have taken jurisdic-
tion of the property of the Borrower or of a substantial part thereof in any involuntary proceeding for the reorgan-
ization, dissolution, liquidation or winding up of the Borrower, and such trustee or receiver shall not be discharged
or such jurisdiction relinquished or vacated or stayed on appeal. or otherwise stayed within thirty (30) days, or the
Borrower shall file a petition or answer, not denying jurisdiction, in voluntary bankrupley or under Chapter X or
Chapter XI of the Federal Bankruptcy Act or any similar law, State or Federal, whether now or hereafter existing,
or such a petition filed against the Borrower shall be approved and not vacated or stayed within thirty (30) days,
or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts gen-
erally as they become due, or shall consent to the appointment of a receiver or trustee or liquidator of all of its
property or a substantial part thereof, or shall have failed within thirty (30) days to bond or otherwise discharge
any attachment or to pay any judgment which is unstayed on appeal.
If there shall occur any default as defined in Item (a) above or if there shall occur and be continuing any default
as defined in items (b) or (c) above, then upon the election of the Financing Institution or the Guarantor, evidenced
by written notice to the Borrower, or if there shall occur any default as defined in item (d) above, then forth-
with and without any election, the obligation, if any, of the Financing Institution to extend further credit shall ter-
minate and all notes outstanding hereunder shall become due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed on their behalf by their duly
authorized agents, this
day of
194
(Borrower)
(Financing Institution)
By
By
(Name)
(Title)
(Name)
(Title)
-26b-
Regraded Unclassified
APPENDIX 8 - EXHIBIT V-D
236
Form of September 1, IN4
EXHIBITS TO TERMINATION LOAN AGREEMENT DATED
, 194
(If additional provisions are to be included in the Loan Agreement in accordance with Paragraph 11 thereof,
they should appear in an Exhibit D which should be attached hereto.)
EXHIBIT A
Form of Note
Place
Date
194
On or before
194
. for value received,
hereby promises to pay to the order of
(Financing Institution)
at
the principal sum of
(Address)
DOLLARS ($
) in lawful money of the United States, and to pay interest thereon from the
date hereof at the rate of
per cent per annum, prior to maturity, payable on the
day of
each
and after maturity by acceleration or otherwise at the rate of
per cent per annum.
This note evidences a borrowing made under and is subject to the terms of a Loan Agreement dated
194
between the undersigned and the payee hereof.
By
(Name)
(Title)
EXHIBIT B
LOAN FORMULA CERTIFICATE
Pursuant to the Loan Agreement between the undersigned and
dated
194
the undersigned hereby certifies to the best of its knowledge and belief as
follows:
1. (a) Principal amount of borrowings now outstanding
$
(b) Principal amount of proposed borrowing, less outstanding borrowings to be refunded
$
TOTAL
$
2. The following amounts have been calculated as of
194
(not more than 30 days
prior to the date of this certificate) with respect to terminated war contracts listed on or added to Exhibit C, in ac-
cordance with accepted principles of accounting and without duplications:
(a)
% of accounts receivable from Governmental contracting agencies aggregating
not less than 5
$
(b)
% of accounts receivable from others aggregating
not less than $
$
(c)
% of reimbursable expenditures for inventory, including only direct labor,
cost of raw materials, purchased parts and supplies, and manufacturing and admin-
istrative overhead aggregating not less than $
$
(d)
% of reimbursable amounts for subcontract settlements paid or to be paid
concurrently from any new borrowing for which this certificate is furnished aggre-
gating not less than $
5
TOTAL
$
Less
(aa) Unliquidated advance payments, progress and partial payments, and any other offsets,
and any amounts included in (a), (b), (c), or (d) above which have been disallowed
by the contracting agency
$
BORROWING BASE
$
3. No amount is included in (a), (b), (e), or (d) above with respect to any item on which a termination claim
can be based which exceeds the amount of such item in the Borrower's most recent termination claim, if any has
been filed. There has been no change in the amount stated in Paragraph 2 since the date therein specified which
would materially decrease the borrowing base.
4. No event exists which constitutes, or which except for notice or lapse of time or both would constitute, a
default specified in the Loan Agreement.
(Borrower)
Dated:
194
By
(Name)
(Title)
-27b
Regraded Unclassified
EXHIBIT C
TERMINATED WAR CONTRACTS
The Borrower certifies that, to the best of its knowledge and belief, the following are terminated war contracts as
defined in the Loan Agreement between
and
dated
. 194 :
Contract or
Date of Contract
Name of Other
Date of Notice of
Estimated Amount of
End Use
Order Number
or Order
Contracting Party
Termination
Termination Claim
of Product
(Borrower)
Dated:
194
By
(Name)
(Title)
-28b-
.
Regraded Unclassified
277
APPENDIX 8 - EXHIBIT Y-E
Form of 1. THIS
EXPLANATORY NOTES
APPROVED BY THE DIRECTOR OF CONTRACT SETTLEMENT WITH RESPECT TO STANDARD
FORMS OF T-LOAN GUARANTEE AGREEMENT AND TERMINATION LOAN AGREEMENT
GUARANTEE AGREEMENT
Opening Paragraph
(1) The guarantee agreement is issued pursuant to the authority contained in the Contract Settlement Act of 1944, the
First War Powers Act, 1941, Executive Order 9112, the Act of June 11, 1942 (56 Stat. 351), and other pertinent provisions
of law. No changes in the guarantee agreement will be permitted except in the most unusual cases and then only with the
concurrence of the Board of Governors of the Federal Reserve System.
(2) Pursuant to section 10(a)(1) of the Contract Settlement Act of 1944, the Guarantor in its authorization or through
its local representative will notify the Federal Reserve Bank in writing that the Borrower is or has been engaged in perform-
ing an operation deemed by the Guarantor to be connected with or related to war production.
Section 1(A)
(3) If one Financing Institution is authorized, as agent for a number of participants, to execute a guarantee agreement
in their behalf, the participants should be referred to as "each bank, trust company or other financing institution which is
or shall be a party to the loan described in Appendix I annexed hereto" or by some other appropriate reference showing the
several nature of the agreement.
Section I(C)
(4) Since the guarantee agreement covers only the loan described in Appendix I, any material alteration in the terms of
the loan should be made only with the written consent of the Guarantor in order that the loan, as altered, will be covered by
the guarantee.
Section 1(E)
(5) The requested percentage of guarantee will not ordinarily be questioned by the Federal Reserve Bank or the Guaran-
tor If it does not exceed 90 per cent.
Section 2(B)
(6) Counsel fees incurred by the Financing Institution after a purchase cannot be shared by the Guarantor because of
the provisions of 5 U.S.C. 314.
Section 3
(7) It is contemplated that a purchase made by the Guarantor under this section shall be for cash. However, if the
Guarantor owns an interest in any obligation which has been issued under a revolving credit arrangement, and if, at or be-
fore the maturity of such obligation, the Reserve Bank receives written demand from the Financing Institution for the pur-
chase of the same or a lesser amount of a new obligation to be issued in place of such maturing obligation, the payment for the
portion of the new obligation purchased pursuant to such demand will be made by the Guarantor by surrendering, at or be-
fore maturity, its interest in the maturing obligation, in the amount of the demand by the Financing Institution and without
regard to the ten-day period specified in this section.
Section S(A)
(8) Under the first sentence the Guarantor may, after a purchase and transfer, administer the loan either directly or
through the agency of the Reserve Bank. It is contemplated that such administration will usually be conducted by the
Reserve Bank.
Section 8
(9) All amounts paid or credited on the obligation after the date of the demand by the Financing Institution or the
Guarantor, as the case may be, for a purchase under this agreement and prior to the date of such purchase will be applied,
as provided in this section, according to the respective interests of the Guaranter and the Financing Institution as such in-
terests exist Immediately after the purchase.
(10) Subject to any special provision which may be contained in Exhibit D, the Financing Institution may make other
loans to the Borrower for the purpose of financing war production or reconversion to civilian business or for other purposes,
provided the proceeds of the Contracts (as the term "the Contracts" is defined in Paragraph 1 of Appendix 1) or inventory
allocable to the Contracts are not pledged as security for such loan. The Financing Institution as security for the side loan
may take other collateral and provide that the side loan shall not be required to share with the guaranteed loan any banker's
lien or right of setoff with respect to funds of the Borrower, exclusive of proceeds of the Contracts, on general deposit with
the Financing Institution or specifically pledged as security for such side loan.
Section 7
(11) A schedule of guarantee fees will be prescribed by the Board of Governors of the Federal Reserve System with the
concurrence of the Director of Contract Settlement.
Section 8
(12) The word "certificate" in Paragraph (B)(2) includes any certificate furnished by the Borrower in connection with
the loan formula.
General
(13) Whenever a number of days is specified in the Guarantee Agreement or in the Loan Agreement the word "days"
shall be deemed to mean calendar days.
-290-
Regraded Unclassified
LOAN AGREEMENT
Opening Paragraph
(14) If the Borrower and the Financing Institution have agreed upon a non-firm commitment, the words "in its sole dis-
cretion" may be inserted before the word "grant". The second sentence of Paragraph 2 applies even in the case of 4 non-
firm commitment and in such a case no figure should be inserted in Paragraph
4.
(15) In the case of a straight loan, the words "at any one time outstanding", should be stricken out.
(16) The note to be used should contain the provisions which appear in the form annexed as Exhibit A to the standard
loan agreement, with the blanks appropriately filled in, and may contain such additional provisions, not inconsistent there-
with or with the terms of the loan agreement, as the Financing Institution and the Borrower may agree. The note may, for
example, contain provisions for sale of collateral in the event of default, allowance for attorneys' fees, etc.
Paragraph I
(17) The following terms are defined in Section 3 of the Contract Settlement Act of 1944:
"(a) The term 'prime contract' means any contract, agreement, or purchase order heretofore or hereafter entered into
by a contracting agency and connected with or related to the prosecution of the war; and the term 'prime contractor'
means any holder of one or more prime contracts.
"(b) The term 'subcontract' means any contract, agreement, or purchase order heretofore or hereafter entered into to
perform all or any part of the work, or to make or furnish any material to the extent that such material in required for
the performance of any one or more prime contracts or of any one or more other subcontracts; and the term 'subcon-
tractor' means any holder of one or more subcentracts.
"(c) The term 'war contract' means a prime contract or a subcontract; and the term 'war contractor' means any holder
of one or more war contracts.
"(d) The terms 'termination', 'terminate', and "lerminated" refer to the termination or cancellation, in whole or in
part, of work under a prime contract for the convenience or at the option of the Government (except for default of the
prime contractor) or of work under B. subcontract for any reason except the default of the subcontractor.
"(g) The term 'contracting agency' means any Government agency which has been or hereafter may be authorized
to make contracts pursuant to section 201 of the First War Powers Act, 1941, and includes the Reconstruction Finance
Corporation and any corporation organized pursuant to the Reconstruction Finance Corporation Act (47 Stat. 5), as
amended, the Smaller War Plants Corporation, and the War Production Board,
"(h) The term "termination claim' means any claim or demand by a war contractor for fair compensation for the
termination of any war contract and any other claim under a terminated war contract, which regulations prescribed under
this Act authorize to be asserted and settled in connection with any termination settlement.
"(m) The term 'final and conclusive,' as applied to any settlement, finding, or decision, means that such settlement,
finding, or decision shall not be reopened, annulled, modified, set aside, or disregarded by any offer, employee, or agent of
the United States or in any suit, action, or proceeding except as provided in this Act."
With respect to the definition contained in paragraph (g) above, the Director of Contract Settlement will from time to time
issue a list of "contracting agencies" indicating those which are currently guaranteeing loans under this Act through the
agency of the Federal Reserve Banks.
(18) It will be noted that the definition of "terminated war contract" contained in Paragraph 1 of the loan agreement is
broad enough to permit borrowings against receivables and inventory under that part of e partially cancelled contract
still remaining to be performed: that under Paragraph 5 assignment of all moneys due and to become due under the entire con-
tract may be required; and that the provisions of Paragraphs 7(c) and 8 apply to all payments under the contract.
(19) Current Commitments on Uncancelled Contracts:
If the Financing Institution and the Borrower desire to enter into a firm commitment for the financing of nontermi-
nated contracts existing on the date of execution of the loan agreement when and if such contracts become terminated, a provi-
sion may be added to Exhibit D listing such nonterminated war contracts with an agreement by the Financing Institution
that such contracts may, upon termination, be added to Exhibit C without further approval. The addition of terminated
war contracts to Exhibit C shall be made by serially numbered supplements filed in five copies with the Financing Institution.
The supplements shall be in the same form as Exhibit C with the following added at the lower left hand corner thereof.
Approved:
194
(Financing Institution)
By
(Name)
(Title)
If the Financing Institution approves of a supplement, it shall sign all copies, retain one for its files, return one to the Bor-
rower, and send the other three copies to the Reserve Bank.
(20) Since the termination loan agreement is designed to finance termination claima rather than production, the Financ-
ing Institution may find it advisable to decline to permit inclusion in Exhibit C of contracts which have been terminated
only to a minor extent when the effect of their inclusion would probably be to make the proposed borrowing in substantial
part a loan for production purposes. The Financing Institution may refuse to permit addition to the list of terminated war
contracts contained in Exhibit C of such contracts as are by their terms not assignable, or may require as a condition of the
addition of such contracts to the list that the Borrower obtain an appropriate amendment permitting such assignment. It
should be noted that prime contracts providing for payments aggregating less than $1,000 are not assignable under the As-
signment of Claims Act of 1940.
-30b-
Regraded Unclassified
238
Paragraph 2
(21) The notes may be made payable on demand, or may be 90-day notes, or may have such other maturity, not more
than three years after the date of the agreement, as the Financing Institution and the Borrower may agree.
(22) Irrespective of whether or not the Financing Institution is under an obligation under the terms of the agreement
to extend further credit, the second sentence of Paragraph 2 is intended to give the Borrower the right to borrow again,
from time to time, up to the amount of the notes which have been given in consideration of the loan until the final maturity
date inserted in Paragraph 2 or until the notes are finally paid pursuant to Paragraph 8 or otherwise, whichever first occurs.
Paragraph 3
(23) The maximum interest rate, as prescribed by the Board of Governors of the Federal Reserve System with the con-
currence of the Director, is 4½ per cent per annum simple interest, and interest may not be charged at a greater rate either
before or after maturity.
Paragraph
4
(24) The maximum commitment fee, as prescribed by the Board of Governors of the Federal Reserve System with the
concurrence of, the Director, is % of 1 per cent per annum based on the average daily unused balance of the maximum prin-
cipal amount of the loan, or a flat fee of not to exceed $50 without regard to the amount or maturity of the commitment.
Accordingly, the commitment fee, if any is charged, may not exceed this maximum. If a flat fee is charged, the first sen-
tence of the Paragraph should be changed to read: "The Borrower shall pay on
a commitment fee
of $
(25) No termination fee, service fee, or other fee of a similar character, except charges covering out-of-pocket expenses
of a financing institution, may be charged.
(26) Out-of-pocket expenses do not include any overhead expenses.
Paragraph 5
(27) The obligation imposed upon the Borrower to make assignments includes the obligation to execute such documents
and take such action in connection therewith as the Financing Institution may reasonably require including, in the case of
rubcontracts, the giving of such notice to the purchasers as may be necessary to perfect the assignments.
(28) The extent to which assignments should be required prior to or contemporaneously with any borrowing under the
first sentence of this Paragraph will depend upon the credit standing of the Borrower and upon the practical problems of
assignment which may exist in a particular case, The Financing Institution may, by an appropriate writing, agree to except
specific contracts from the requirement of assignment, in which case notice of the contracts so excepted should be given to
the Reserve Bank. The Financing Institution may also provide in Exhibit D for a general exception. For example, Exhibit
D may provide that contracts on Exhibit C as to which the "Estimated Amount of Termination Claim" is less than $
need not be assigned unless subsequently requested by the Financing Institution or the Guarantor. If such a provision is in-
cluded in Exhibit D, the dollar amount of contracts so excluded may, if the Borrower's credit is strong enough to warrant,
be made sufficiently high 50 that Paragraph 5 will in effect merely constitute a covenant to assign upon request of the Financ-
ing Institution or the Guarantor.
(29) In the case of a weak credit, the Financing Institution should include, in Exhibit D, a covenant reading substantially
as follows:
"At any time upon request of the Financing Institution or the Guarantor, the Borrower will pledge or mortgage as
further security for the loan all or any inventory applicable to the Contracts."
Any pledge pursuant to such a covenant should contain a provision for release of inventory so pledged to the extent of pay-
ment to the Financing Institution of the cost or proceeds thereof, as the case may be, in accordance with the terms of Para-
graph 8 of the loan agreement.
(30) Under the last sentence of this Paragraph, the Financing Institution and the Borrower in suitable cases may agree
to a provision in Exhibit D permitting the existence of liens to secure advance payments.
(31) The number of days during which an encumbrance may be permitted to remain on inventory of the Borrower with-
out creating a default, which is to be inserted in the last sentence of this Paragraph, will depend primarily upon the credit
standing of the Borrower.
Paragraph 6
(32) The Financing Institution shall promptly submit to the Reserve Bank two copies of the loan formula certificate
furnished by the Borrower at the time of the initial borrowing. In the event of a serious dispute between the Financing In-
stitution and the Borrower as to whether the borrowing base is substantially overstated in value, for the purposes of this
Paragraph or of Paragraph 8, the parties may, if they mutually desire, request the Guarantor to consider the matter. If at the
time of any borrowing, or of any other time, additional security not referred to in the application or loan agreement and not
previously reported is furnished, a report thereof should be promptly made by the Financing Institution to the Reserve Bank.
Paragraph 7
(33) The Financing Institution may, for example, deem it desirable to require under the first sentence of this Paragraph
the furnishing of profit and loss statements, an analysis of surplus, data BS to claims under the Borrower's terminated war
contracts, and statements as to the insurance required to be maintained by the Borrower under Paragraph 10.
(34) One copy of each of the statements to be furnished under subparagraphs (a), (b) and (c) may be retained by the
Financing Institution, and two copies should be forwarded to the Reserve Bank, which will retain one copy and forward the
other to the Guarantor or such person as the Guarantor may designate.
(35) Under the definition of payments, a number of different situations are contemplated:
(a) There may be a sale of inventory specifically approved or authorized by the proper authority. In such case, the pay-
ment will be the amount of the proceeds; the date of payment will be the date of receipt of the proceeds by the Borrower.
(b) There may be a retention of inventory approved or authorized by the proper authority with a specific credit allowed
on any claim filed. In such case, the payment will be the amount of the credit allowed; the date of payment will be the date
of the allowance of the credit.
-31b-
Regraded Unclassified
(c) There may be a sale of inventory approved or authorized by the proper authority under a blanket authority to dispose
of inventory at not less than cost or at not less than a stated percentage of cost. In such case, the amount of the payment
will be the amount of the proceeds; the date of payment will be the date the proceeds of the sale are received by the
Borrower.
(d) There may be a definitive election to retain inventory not approved or authorized by the proper authority with a
specific credit against the Borrower's claim where claim has been filed or against his potential claim where none has been
filed. Such a definitive election to retain occurs when the Borrower relinquishes the right to include the cost of such loven-
tory in his claim and may be evidenced by written notice to the proper authority, by sale of the inventory without specific
credit, by incorporation of Inventory in civilian products, or by other means. In such case, the amount of the payment will
be the cost of the inventory or, if the act of election is a sale, the proceeds of the sale if that is greater than cost; the date
of payment will be the date when the definitive act of election was made.
In the case of a prime contract the "proper authority" to approve or authorize dispositions or retentions of property is the
contracting agency. In the case of subcontracts the "proper authority" may be the purchaser or the contracting agency or
both depending on the circumstances and the applicable regulations. The word "cost" refers to the Borrower's costs or ex-
penditures used in computing the borrowing base,
Paragraph #
(36) The Government does not undertake responsibility for assisting in the financing of civilian inventory under the
provisions of the Contract Settlement Act of 1944. Therefore, the Financing Institution, if it prescribes a period in excess of
three days, should prescribe a reasonably short period within which the payments required by Paragraph 8 are to be made. The
Financing Institution may prescribe different periods for payments arising out of the several classes of events upon the hap-
pening of which payments are required to be made, and may prescribe a period of grace for small payments. If the credit of
the Borrower is not strong. prompt payment should be required, particularly in the event of inventory retention.
(37) If either the Financing Institution or the Guarantor notifies the Borrower of an overstatement pursuant to clause
(b) of Paragraph 8, it should forthwith notify the other party to the Guarantee Agreement.
Paragraph 9
(38) If the Borrower has subsidiaries and if It is desired to use consolidated net current assets as a basis, this should be
specified in Exhibit D. In this event, consideration should be given to whether or not any restrictions imposed upon the
parent should also be applied to the subsidiaries.
Paragraph 11
(39) The standard form of loan agreement is designed for use in connection with a straight loan or a revolving credit, 6
firm commitment or a loan under which the Financing Institution is not obligated to extend further credit, a single bank
credit arrangement or a multi-bank credit arrangement, and for a strong credit or a weak credit. It is recognized that the
Financing Institution and the Borrower may wish to add in Exhibit D further provisions appropriate for the particular
financing arrangement between them.
(40) Conditions other than those required under Appendix I will be prescribed by the Guarantor or the Federal Reserve
Bank only in exceptional circumstances and when they are clearly necessary to protect the Government's interest; bot it is
expected that the Financing Institution, in the case of a weak credit, will ordinarily insist upon the Inclusion of the provision
quoted in Explanatory Note (29). Additional conditions for inclusion in Exhibit D may be agreed upon by the Borrower and
the Financing Institution and, if not unreasonable or inconsistent with the standard termination loan agreement, such con-
ditions will not be objected to by the Guarantor or the Reserve Bank.
(41) The Guaranter will have no objection to the insertion of a provision requiring the Borrower to apply first to the
Financing Institution before obtaining any other loans. The Financing Institution may also insert an additional provision
prohibiting other borrowings, without the consent of the Financing Institution, or placing a ceiling thereon.
(42) In order that additional terms may be clearly distinguished from the provisions of the standard form, all such ad-
ditional terms should be set forth in Exhibit D or in a rider attached thereto.
(43) In any case where either the Financing Institution or the Guarantor exercises its option under the Loan Agreement
to terminate the credit and accelerate the notes, it should forthwith notify the other party to the Guarantee Agreement.
Exhibit B-Paragraph 2
(44) In general, the percentages in the loan formula certificate agreed upon by the Financing Institution and the Borrower
will not be questioned by the Federal Reserve Bank or the Guarantor.
(45) If a breakdown between manufacturing and administrative overhead is available, it should be furnished by the
Borrower, and in this case the words "and administrative" may be omitted from item (c) and an additional Item relating
solely to administrative overhead may be added. Similarly, where circumstances warrant, there may also be added a sepa-
rate Item relating to other reimbursable expenditures, provided that a breakdown of such item la furnished and approved. In
any of the above cases, the additional items will be lettered (e), (f), etc. If a further breakdown of expenditures is desired, as
between fixed-price and cost-plus-a-fixed-fee contracts or as between prime contracts and subcontracts or as between ap-
proved and unapproved subcontract settlements, this may be accomplished by similar procedure.
(46) With reference to (aa), amounts "disallowed by the contracting agency" include any part of a termination claim dis-
allowed pursuant to Section 13 of the Act regardless of whether the Borrower has taken an appeal, except to the extent that
such appeal is sustained.
Exhibit B-Paragraph 3
(47) It is expected that in all cases the Borrower will exercise due diligence in filing termination claims as promptly as
possible. Due to the widely varying factors involved, such as the number of Borrower's cancelled contracts and the relative
simplicity or complexity of preparing his claims, it is not deemed feasible to prescribe any uniform time within which claims
must be filed. However, where the Financing Institution and the Borrower can agree in advance upon a reasonable time for
filing claims, they can of course provide for such a limitation in Exhibit D.
-32b-
Regraded Unclassified
239
APPENDIX B - EXHIBIT VI
OFFICE OF CONTRACT SETTLEMENT
September 8, 1944
REGULATION NO.2
Pursuant to the authority conferred upon me by Section " (b) and Bec-
tion 8 (c) of the Contract Settlement Act of 1944, the following policies,
principles, methods, procedures, and standards relating to partial payments
on account of termination claims of all var contractors, including cost-plus-
a-fixed-fee contractors, are prescribed for all contracting agencies:
1. General Policies. The contracting agencies are hereby directed
to provide war contractors having any termination claim or claims with ade-
quate interim financing within 30 days after proper application therefor
to such agencies. Upon request of var contractors, such interim financing
shall be effected through partial payments to the greatest extent practicable.
Contracting agencies and var contractore shall take adequate steps to assure
that subcontractore receive partial payments when desired by them. Determine-
tion of the amount of portial paymente to be made under this regulation shall be
without projudice in the negotiation of final settlement. Such paymente shall
be subject to Section 9 (b) of the Act, providing that any amount paid in
excess of the amount finally determined to be due on the termination claim shall
be treated BP oan from the Government to the var contractor receiving it.
2. Typ of Partial Payments. (a) The types of partial payments which
shall be made are as follows:
(1) Immediate partial payments, based on contractors' estimates;
(11) Cost-supported partial payments; and
(111) Controlled partial payments into special accounts.
(b) Partial payments shall, in general, be made to prime contractors
on their own applications based on their own termination charges and on the
applications of subcontractors transmitted through the prime contractor and
any intervening subcontractors to the contracting agency. Such applications
shall be made, by both prime contractors and subcontractors, in substantially
the form of Application for Partial Payment provided. In appropriate
08808, partial paymente may be made to war contractors to enable them in
advance of subcontractors' requests, to net up 8 fund from which prompt par-
tial end final paymente may be made to their subcontractors; in such cases,
special requests vill be made, which need not follow the application form. The
contracting agencies may, in addition, vary the application form in such manner
as they deem appropriate to the particular case to provide for the making
of partial payments upon a group of war contracts.
3. Immediate Partial Payments Based on Contractors' Estimates.
(a) Contracting agencies shall make immediate partial payments for
the benefit of any var contractor, whether prime contractor or subcontrac-
tor, promptly upon the filing of application therefor. Contracting agencies
should promptly grant the request for partial payment in the largest amount
believed reasonable under all the circumstances then known, but such amount
shall not exceed 90% of the emount certified in the application as due on
account of the contractor's own coste allocable to the terminated portion of
the contract. In deciding the amount to be paid, the contractor's application
should be considered in the light of the general reputation of the contractor
and other relevant factors. Contracting agencies should authorize personnel
making partial payments to base their determination of the amount to be paid
solely on the contractor's application unless there in knowledge of other
relevant factors militating against such payment.
-33b-
Regraded Unclassified
(b) An immediate partial payment vill be made in each case in an
amount not less than 75% of the contract price of completed articles not
delivered, plus 75% of the contractor's satimated costa of raw materials, pur-
chased parts, supplies, direct labor and overhead allocable to the terminated
portion of & contract (but not including the cost of special facilities or other
items deemed likely to be of a controversial character, and not including profit),
unless (1) the contracting agency has reason to believe that the application
for immediate partial payment vas not filed in good faith, or that the amount
requested is excessive, or that protection of the Government's interests re-
quiree denial of the application or payment in a lesser amount, or (2) unless
the contractor requeste payment in & lesser amount. This provision for mini-
mum partial payments shall not be construed to limit the responsibility of the
contracting agencies to make partial payments in the largest amount believed
reasonable under the provisions of subparagraph (a) of this paragraph 3.
4. Cost-Bupported Partial Payments. Waen the contractor has submitted
substantial accounting data, and a preliminary review thereof indicates that
the application 1a proper and 1s supported by the data submitted, the contract-
ing agency, to the extent requested, shall make an additional partial payment,
or if none has previously been made, 6. partial payment, in an amount which,
together with any other partial payments previously made on the same termina-
tion claim, equale:
(a) An amount equal to 100 percent of the amount payable, at the
contract price, on account of acceptable items completed prior to the termina-
tion date under the terms of the contract, or completed thereafter with the
approval of the contracting agency; plus
(b) An amount equal to 90% of the cost of rav materials, purchased
parts, supplies, direct labor, and manufacturing overhead allocable to the
terminated portion of the var contract; plus
(o) A reasonable percentage of other allowable costa, including
administrative overhead, allocable to the terminated portion of the var oon-
tract not included in the foregoing; plus
(d) Such additional amounts, if any, as the contracting agency deems
necessary to provide the var contractor with adequate interim financing.
The amount to be paid under subparagraphs (a)-(d) above should not be greater
than the amount which, in the opinion of the contracting agency after such a
preliminary review, ie due to the contractor by reason of the termination,
5. Controlled Partial Payments. When a war contractor requesting or
forwarding an application for a partial payment, is deemed to be insolvent or
in imminent danger of insolvency, or when an application for immediate partial
payment under the conditions set forth in paragraph 3 above has been in whole
or in part denied, partial payments may be deposited in a special account.
Partial payments deposited in special accounts will be released as particular
items of cost or payments to subcontractors are approved. The interest of the
Government in such controlled accounts shall be protected by such methods as
the contracting agency considers advisable. Additional payments may be made,
from time to time, into the controlled account by the contracting agency.
6. Partial Payments to Subcontractors. The application of a subcontrac-
tor for partial payment shall be filed with the var contractor in the tier
immediately above him, and unless that war contractor makes the payment pur-
suant to authorization from the contracting agency, shall be transmitted
through contractual channels to the contracting agency having jurisdiction over
the prime contract. Each prime contractor and upper tier subcontractor trans-
mitting the application shall subscribe thereon a statement substantially as
set forth on the form of application; or, in any appropriate case, an expla-
nation of its unvillingness to subscribe to such & statement. In the event
that the contracting agency totally denise the application for partial payment
it shall provide for the transmission of notice of the denial through contrac-
tual channels or othervise, to the applicant. Partial payments to subcontrac-
tore are authorized to be made as follows:
-34b-
Regraded Unclassified
240
(a) Such payments shall, BO far as possible, be made to prime contrac-
tore in reliance on their agreement to pay over to their subcontractors or to
credit against amounts oving from such subcontractors the amounts received by
them for the benefit of such subcontractors.
(b) If a prime contractor or an intervening subcontractor is deemed
to be insolvent or in imminent danger of insolvency, or for any other reason
1e unable or unvilling to pay over to his sobcontractors any partial payment
received for their benefit, the contracting agency may utilize the controlled
account procedure not forth in paragraph 5 above.
(c) The contracting agencies may make partial payments directly to
subcontractors, in accordance with such procedures as have been or may be author-
ized by such agencies; and should make such partial payments directly where
there 1a evidence of unwarranted delay under the normal procedures.
In the cases provided for in subparagraphe (b) and (c) above, payments
may be made without the certificates of intervening contractors, provided that
sufficient other information Justifying such partial payments in available.
Nothing in this regulation shall be construed to prevent any war con-
tractor from making partial or other payments to its subcontractors pursuant to
delegation from the contracting agency, or subject to subsequent approval by
the contracting agency.
7. Estimates of Partial Payment Arrived at in Advance of Termination.
Interim financing by means of partial payments vill be facilitated if contrac-
tore estimate the amounts required where this 16 practicable, in advance of
actual termination. Such prior estimates will be based upon the cost of the
estimated inventory, including raw materials and work-in-process, allocable to
the terminated portion of a contract at specified stages of completion, exclud-
ing those items which he intends to retain. Estimates arrived at between the
contractor and a contracting agency in advance of termination vill not constitute
binding commitments upon a contracting agency but will be subject to confirma-
tion and adjustment by the contracting agency on or after termination. They
will, however, provide a realistic means for contractors to discuss their prob-
able financing requirements with contracting agencies and with their immediate
customers and will afford a basis on which, prior to termination, the reasonable-
ness of contractors' estimates of coste on which the partial payments will be
granted, may be checked, subject to any necessary adjustment after termination.
8. Assignments. Any interim financing by means of partial payments here-
under shall be made in such a manner as not to impair or modify any valid
assignment of any claim under a var contract without the consent of the parties
thereto, Contracting agencies in making partial payments, however, may rely on
the statement in the application that no assignments are outstanding, in the
absence of actual knowledge to the contrary by the contracting officer or notice
given in accordance with the Assignment of Claims Act of 1940.
9. Deduction of Outstanding Advances, etc. In determining the amount of
partial payments to be made, there shall be deducted from the amount otherwise
payable under this regulation:
(a) Any unliquidated balances of advance and partial payments
theretofore made to such var contractor, which are allocable to the terminated
var contract or the terminated part of the war contract; and
(b) The amount of all credits for the disposal or retention of
property as to which costa or estimated costa were included in any applica-
tion for partial payment under the terminated contract.
-35b-
Regraded Unclassified
10. Demande for Repayment. Under the terms of the application form,
the contractor requesting a partial payment agrees to repay to the Govern-
ment, upon demand, the whole or any part of the partial payment if the con-
tractor fails to file the prescribed forms in support of its claim within
the required time, and under other stated conditions. Contracting agencies
are not required to demand repayment of any partial payment or portion
thereof under these conditions, but may do 80 whenever in their opinion the
interest of the Government BO requires.
11, Overpayments. Any amount of a partial payment in excess of the
amount finally determined to be due on account of the war contractor's own
charges shall be treated as a loan from the Government to the war contrac-
tor receiving it, and shall be payable upon demand with a penalty of 6% per
annum from the date such excess arises until the date such excess 18 repaid.
The contracting agencies shall be charged with the responsibility for insti-
tuting procedures for determining the existence of any such excess.
12. Overstatements of Claims. If a war contractor overstates the
amount due on account of his own termination charges in connection with any
partial payment applicable to such charges, he shall pay to the United States
a penalty of 6% of the amount of such overstatement; if not paid, this penal-
ty may be deducted in the final settlement of his claim, The Director of
Contract Settlement may suspend or modify any such penalty if in his opinion
the imposition thereof would be inequitable.
13. This Regulation Not Exclusive. Nothing contained in this regulation
shall restrict the authority and discretion of contracting agencies to provide
other methods of interim financing in accordance with the Contract Settle-
ment Act of 1944, or to make immediate partial payments on other bases or in
amounts larger than those required to be made hereunder, or to take appropri-
ate action to protect the interest of the United States under guaranteed
loans previously made to var contractors receiving partial payments.
14. Speed in Final Settlement. The making of partial or advance payments
shall not relieve contracting agencies of the responsibility for making final
settlements with the utmost promptness. Interim financing shall not be re-
fused, restricted, or unduly delayed in order to compel a contractor to 80-
cept & settlement.
The reporting requirements of this regulation have been approved by the Bureau
of the Budget in accordance with the Federal Reports Act of 1942.
ROBERT H. HINCKLEY
Director
-36b-
Regraded Unclassified
241
Puro Approved
(See Certificates and Indructions - Reverw Side)
of the Na
Form 4
Omer of Commit -
APPLICATION FOR PARTIAL PAYMENT
(For Use by Prime Contractor or Subcontractor Under Terminated War Supply Contract)
SECTION I. This application applies to (chock one):
A prime contract with the Government, or
Bubeontract or purchase order No(s).
(Apolimed)
with
(Name of restrutor who - Nation of Terminative)
(Street address
(Addres)
(Cay)
(Itate)
If contractor has V, VT, or T loans or has assigned moneys due under
Govt. Agency
the contract, give came and address of:
Govt. Prime Contract No.
Financing Institution
Contractor's Reference No.
Effective date of termination
Guarantor
Amount requested, $
Amignee
This is application No.
under this termination,
BecToM II. Status of Contract or Order at Effective Date of Termination
Finished
United . -
On hand
Products arrend by serminated anstract of
Total covered by
unler
Previously shipped
minizant If under
and
Payment to be
received through
Instruted in this
application
To be completed
Not la in completed
Invoicing
Quan.
is
Quan
$
Quan.
$
EECTION III. Applicant's Own Termination Charges (Exclusive of his Subsontractors' Charges)
Date attiment proposal automited
Date of de application
ITEM
Charge M listed in
Best estimate of mass instrud is
date of da application
proposal
(Not included under (A))
(A)
(10)
L. Acceptable finished product (at contract price)
$
I
2. Work in process,
a. Blaw materials, purchased parts, and supplies
4. Gegeral and administrative expense.
&
TOTAL (sum of lines 1, 2, a, and 4)
5
5
fl. Tools, dies, jiga, fistures, etc.
7. Other costa
8. Settlement expenses
9.
TOTAL of lines a. 6, 7. and 8.
$
5
AMOUNTS RECEIVED
a. Unliquidated partial, progress, and advance payments received prior to termination
-
& Unliquidated partial, progress, and advance payments received after termination for OWN use
e. Credita from disposal or retention of inventory included in above charges
d.
TOTAL (sum of lines a, b, and e)
$
e. Amount of partial payment requested
J.
TOTAL (sum of lines d' and e)
5.
Secrion IV. Agreement of Applicant
Under Section 9 (b) of the Contract Bettlement Act of 1944, the amount of any partial payment made to the applicant in excess of the
amount finally determined to be due on its termination claim shall be treated as a loss from the Government, payable upon demand with &
penalty payable by the applicant at the rate of 6 percent per anoum from the date of the extre payment to the date of repayment. Accord-
ingly, in requesting a partial payment, the applicant recugnises its obligation to establish promptly the amount due and to protect the interest
of the Government pending tinal settlement, and in consideration of any partial payment which may be made, agrees as follows:
(1) Prompt Preparation of Claim-The applicant will, with all reasonable dispatch. prepare and file its statement of costa and inventory
lista on the prescribed forms, and will make every reseronable effort to expodite final settlement of the termination claim and the
claims of its subcontractors.
(2) Disposal and listenhian of the amount of any proceeds hereafter received by the applicant on the disposal of
termination inventory, plus the cost or agreed value, an the case may be, of any termination inventory which the applicant bereafter
electa to retain, exceeds 10 percent of the amount stated by the applicant in this application - the amount of his charges (Beetion
III, line 9) and the amount of such credits has me herein included M a receipt (Section III, line e), the applicant within 10 days will
notify the contracting agency of the amount of enstits en account of such Inventory disposal or retention.
(3) Repayment-The applicant will repay to the Government upon domand, together with Interest from the date of such demand st the
rate of 6 percent per annum, the whole or any part of the partial payment to be made harounder, If:
(a) A statement of ensits and inventory lista nn the prescribed forms, M provided in subparagraph 1 above, have not been filed
within 3 months after the receipt of the partial payment for which request in herein made, or within such extended period M may be
allowed by the Government;
(A) The contracting agency shall find that the applicant's estimato under Section III above (own costa) is overated by reason
of the disposal or retention of termination inventory subsiquent to the date of this application or for any other reason,
(c) The applicant withdraws the whole or any part of its claim.
Demand for repayment may be made under subparagraphs (b) and (c) only M to that portion of the partial payment that, in the opinion of
the contrasting agency, has become excessive.
When the space provided for any Information le Insufficient, attach separate supporting schedules
-37b-
Regraded Unclassified
Section V. Certificate of Advilicant
The indersignal artike that the assust of his own charges (melasive of charges) due M of the date of this
and allorable to the terminated portion of the cuotrast No.
dated
with
to not less than $
& that, to the land of applicant's knowledge, the amounts received are as set forth above: and that the
applicant has not assigned any moneys payable under this contrast, except - art. forth sbove.
Name of custrative
Date
Signer
Title
SECTION VI. Rerummendation of First Reviewing Contractor
The undersigned sistem that a has examined this application and has considered the applicant's general reportation. Is has Bill reason 10
doubt the accuracy of the information contained in this application or that the amount certified by the applicant M due will constitute a proper
charge to be included in the undersigned's termination claim against
It renummends that the
requested partial payment be made.
The undersigned agrees that it will promptly pay over in the applicant or credit against amounts owing from the applicant any amount
received for the benefit of the applicant under this application, soil that it will repay to the Government on demand any amount not go paid
or credited.
Name of contractor
Date
Signer
Title
Section VII. Recommendations of Other Reviewing Contractors
Each of the undersigned states that it has no reason in doubt that the amount of the partial payment requested, and recommended above
is due the applicant and will constitute a proper charge in the termination claim of the undersigned.
Each of the undersigned agrees that is will promptly pay over to its immediate subcontractor or credit against amounts owing from such
subcuntractor any amount received for the benefit of the applicant under this application, and that is will repay to the Government on demand
any amount not so paid or credited.
Identification of
Contractor
Signature of after. partner, or owner
Data
your contract
1.
2.
3.
4.
&
6.
INSTRUCTIONS
1. Un of Parm-This application form is for use by all war contractors, either prime contractors or subcontractors, under either Bxed-prioe
or cost-plus-a-fixmi-fro contracts in obtaining partial payments on their termination claims. If applicant is a cost-plus-a-Bred-fee contractor,
the form may be so modified as to conform to his accounting system but must furnish the required ent information.
2. Immediate Partial Payments Based on Estimates -(a) Where a contractor has nink had adequate time to prepare his settlement proposal,
an "immediate partial payment" may be requested based on the contractor's estimate of Isla own charges. In applying for a payment of this
type, the contractor should fill in the information required in column B of Section III. If his accounting system is not adaptable to the cost
Information required by Section III, he should appead to the application A eumparable schedule of Isia estimated costs on such basis as his
accounting system pormits. Supporting data, including financial statements, may be submitted but are not required unless specifically requested
by the contracting agency,
(b) The estimatos need be no greater than the contractor believes admunte to support his request for partial payment. Low estimates
furnished for the purpose of an Immodiate partial payment will in no way prejudico the contractor in the final sottlément of his claim or in
subsequent requests for additional partial payments. Surcessive applications for partial payments may be filed.
3. Cost-Supported Partial Payments.-Upon the submission of & settlement proporal, or at any time thereafter, a "cost-supported partial
payment" may be requested based on the settlement proposal and accounting data supporting it. In applying for a payment of this type, the
contractor should fill in the Information required by ecluma A of Section III. In addition, he should attach a copy of the settlement proposal.
4. Certificate of Applicant.-The amount certified in Bection V as the amount of the contractor's charges should be the total that appears in
Section III, lise 9. If surge of the charges are enst-supported and others are estimated, appropriate entries may be made in both columns A and
B, and the amount surtified should them be the sum of the two figures in line 9.
5. Property Disposit stating costs or estimated costa, the applicant should not Include charges with respect to property which be
intends to misin at no cost to the Government. Any credits that have resulted from the sale or retention of property as to which costs or esti-
mated custs have leven Included ... any application for a partial payment on this terraination claim will be entered in Suction III, line c.
fl. Obligations le is called to the fact that the sost of delivered completed articles may not be Included in the
termination claim of the producer of those articles, War contractors are obligated to pay at the contract price for completed articles shipped to
them by their and suppliers prior to the termination of and in accordance with the provisions of the subcontracts or purchase
orders calling for delivery of those articles. When necessary, prime contractors and subcontracture should apply for partial payments on their
termination claims fur the purpose of coabling them till moet such obligations promptly.
7. Applications of applying for a partial payment will submit this application to the contractor Immedi-
ately above them Unless that contractor has been authorized by the contracting agrney to make a partial payment without obtaining specific
approval in each ease, line will attach his recommendation on the form provided in Section VI and forward the application through the san-
tractors above him to the entracting agency, Contractore ahove the immediate reviewing contractor will fill in the form of recommendation
not forth in Section VII and forward the application, If any contractor disapproves of the amount of the requested partial payment, or believes
that he cannot properly -ign the form of recommendation, lie should attach a statement setting forth the reasons for his refusal to sign the form
and his recommendation. In the caso of an application for a cost-supported partial payment, the settlement proposal need not be forwarded
beyond the first reviewing contractor unless expressly requested.
8. Signatures.-A person other than an officer, partner, or DWGEF may sign the application or recommendation where properly authorized,
but in such & case, a enpy of his authority should be attached.
9. THE CONTRACT SETTLEMENT ACT OF 1944 PROVIDES PENALTIES FOR OVERSTATEMENTS OF AMOUNTS OWING
TO THE CONTRACTOR IN CONNECTION WITH INTERIM FINANCING AND FOR EXCESSIVE PAYMENTS (SECTIONS
5 (d) and 9 (b)), PENALTIES FOR FRAUD ARE PROVIDED FOR IN SECTION 10 OF THE ACT.
When the space provided for any Information in Insufficient. attach separate supporting schedules
8b
Regraded Unclassified
2.2
APPENDIX B - EXHIBIT VII
OFFICE OF CONTRACT SETTLEMENT
REGULATION NO. 3
Directive Order 2 of the Office of War Mobilization is amended by the
addition of paragraph 5 as follows:
"
*****
"5. Any department or agency of the Government may embody in
any contract a special agreement to pay the contractor, as
fair compensation for the termination of the contract, amounts
specified in the contract or to be readily computed according to
specific methode, standards or bases appropriate to the particular
contract and set out therein, in lieu of any other compensation
therefor, whenever the department or agency determines (1) that
the available data permits a reasonable forecast, consistent with
sound commercial standards, of the factors involved in determining
what will be fair compensation for termination in the case or
class of cases and (2) that such agreement will substantially
facilitate settlements, plant clearance, reconversion from war
to civilian production or the efficient use of materials, manpower
and facilities or will otherwise promote the objectives of the
Contract Settlement Act of 1944. Such special agreements may
be included in original contracts or may be inserted in contracts
by amendment made before their termination; and, when so included
or inserted, are hereby determined to provide a method for deter-
mining fair compensation for the termination of such contracts."
Robert H. Hinckley
Director
September 27, 1944
-39b-
Regraded Unclassified
APPENDIX B EXHIBIT virt43
OFFICE OF CONTRACT SETTLEMENT
GENERAL REGULATION NO. 4
Pursuant to the authority conferred upon me by section 4 (b) and section 12(g)
of the. Contract Settlement Act of 1944, the following policies, principles,
methods, procedures, and standards relating to removal of government-owned plant
equipment from private plants of war contractors are prescribed for all contract-
ing agencies.
1. General Policies. It shall be the policy of the owning agencies_ 1 of the
Government to assure the orderly and expeditious removal from the private plants<
of war contractors of Government-owned machinery, tools and equipment (hereinafter
called "plant equipment") which, by reason of termination of war contracts at the
option, or for the convenience, of the Government or otherwise are no longer re-
quired by the contractors for war production or for the national defense and which
are not to be retained by them. Much plant equipment is now held by war con-
tractors under contracts or contract provisions specifically governing its use,
retention, storage, maintenance or disposition (hereinafter called "facilities
contracts") which obligate the war contractors to maintain the plant equipment in
standby condition after it has become excess to the needs of the war contractors
for war production, or which may otherwise impede orderly and expeditious plant
clearance if enforced. To the extent found necessary to effectuate the policy of
orderly and expeditious plant clearance, and consistent with the determination
of the owning agencies aa to the retention at contractors' plants of plant equip-
ment necessary for the national defense, the owning agencies will waive or release,
upon such terms and conditions as they may deem appropriate, any existing obli-
gations of the war contractors under facilities contracts.
2. Procedure for plant clearance. The following general procedure will be
observed by war contractors and the owning agencies in effecting plant clearance:
(a) Whenever a war contractor 18 of the opinion that he no longer requires
for the performance of any war contract any plant equipment installed in his
plant covered by an option to purchase or lease which he is then entitled to
exercise, he will promptly notify the owning agency whether he desires to exercise
the option or 1s willing to waive it. If he indicates that he desires to exercise
the option and the owning agency determines the option provisions are operative,
disposition of the plant equipment will be made accordingly.
(b) With respect to plant equipment which the war contractor considers no
longer required for war production, (1) not covered by such an option, or (11)
covered by an option which the war contractor 1a willing to waive, he will
promptly2 submit to the owning agency:
1 The term "owning agency" refere to the Government agency which owns or holds title
for the United States to the plant equipment located in the plant of the war con-
tractor.
2 The terms "private plants" and "h1s plant" refer to buildings or other structures
owned by the contractor or leased by him from a party other than the Government
and do not refer to contiguous separate buildings, extensions to buildings, or
other structures owned by the Government.
3 In aid of sound administration, war contractors should not make repeated submis-
sions covering minor amounts of plant equipment.
-41b-
Regraded Unclassified
(1) a list of the plant equipment, adequately itemized and described,
showing:
(a) the plant equipment which the war contractor desires
to retain;
(b) the plant equipment which, in the opinion of the war
contractor, must be removed from its then location in
order to make room for other production (specifying
the production for which the space occupied by this
plant equipment 18 immediately needed); and
(11) 8. statement of the amount of space that is or can be made avail-
able, in the plant or plants of the war contractor or elsewhere
in the vicinity, for the temporary storage of plant equipment; and
(111) a statement of whether the war contractor can arrange to use his
own personnel to dismantle and prepare the plant equipment for
removal and shipment, or intends to use outside contractors for
this purpose.
(c) Unless the war contractor is notified within 10 days after receipt by
the owning agency of the list and data that they are not satisfactory, then, within
20 days following such receipt:
(1) the war contractor will be notified whether any plant equipment
on the list has been determined by the government to be necessary
for his war production or for the national defense; and
(11) with respect to the balance of plant equipment on the list, the
war contractor will be notified:
(a) whether the government 18 willing to dispose of any
plant equipment to the war contractor which he desires
to retain;
(b) whether it is desired that the war contractor (1) store
plant equipment in available storage space in his own
plant or plants, or (11) dismantle and prepare plant
equipment for removal ,and shipment. The war contractors
will be furnished with specifications, standardized BO
far 88 may be practicable, regarding methods of storage,
or preparation for removal and shipment.
-42b-
Regraded Unclassified
214
(d) Subject to the provisions of 3 below, the following will be accomplished
within 60 days (or less if feasible) after receipt by the owning agency of a satis-
factory list and data, with respect to all plant equipment on the list not deter-
mined by the Government to be necessary for the war contractor's war production or
for the national defense:
(1) The Government will dispose of any or all of the plant equipment
to the war contractor which the Government is willing to release.
(11) As to the balance of plant equipment:
(a) The war contractor, in accordance with specifications,
will temporarily store in available storage space in
his own plant or plants the plant equipment which has
been designated by the owning agency for such storage.
(b) The war contractor with his own personnel, or personnel
under outside contract, will dismantle the plant equip-
ment not retained for storage and prepare 1t. for removal
and shipment in accordance with specifications. The
plant equipment will thereupon be removed by or on behalf
of the Government.
(111) Prior to or at the time of storage or removal, the war contractor
will furnish the Government with an undertaking to waive all option
and similar contract rights with respect to this plant equipment
whenever requested by the Government.
3. Matters for negotiation and agreement. -- It is recognized that the pro-
visions of existing facilities contracts may be inconsistent with the procedures
set forth in 2 (d). It is also recognized that existing facilities contracts do
not in all cases indicate who is to bear the costs of dismantlingand preparation,
removal, or storage. Such matters (including the terms and conditions of the
waiver or release of any existing obligations of the war contractors under facili-
ties contracts) will be made the subject of negotiation and agreement. Such agree-
ment will normally be reached within the time prescribed in 2(d) for final action.
In other cases it may be feasible to carry out the physical steps prescribed in
2(d) within the time there allowed, postponing agreement on such matters as
division or costa until 8. later date (for example, the date of any related termina-
tion settlement). Where agreement on essential terms cannot be reached and the
war contractor 1a not willin} in the absence of such agreement to carry out the
physical steps prescribed in 2(d), the parties will be remitted to their respective
rights under the existing facilities contract or any applicable provisions of law.
4. Contractor's right to store at his own expense. Except where the appli-
cable fecilities contract contains inconsistent provisions and such provisions
have not been waived, a war contractor may at any time remove from his plant and -
-43b-
Regraded Unclassified
store n his own premises or elsewhere at his own expense and risk, any plant
equipment which has not been theretofore determined by the Government to be neces-
sary for the war contractor's war production or for the national defense. The
war contractor will use reasonable care in the transportation and preservation of
plant equipment BO removed and stored, and will comply with any standardized speci-
fications covering removal, preservation, transportation, and storage which may be
issued by the owning agency and will notify the owning agency of the action taken.
5. Contractor's right to store at Government expense. -- Except where the
applicable facilities contract contains inconsistent provisions and such provisions
have not been waived, a war contractor who has (Bo far as permitted by the Govern-
ment) carried out the procedure prescribed in this statement, may, at any time
after the lapse of 60 days from the date of receipt by the owning agency of a satis-
factory list and data, and upon 20 days' prior written notice to the owning agency,
remove from his plant and store on his premises or elsewhere, for the account and
at the risk and expense of the Government, any plant equipment included in such
list which has not been theretofore determined by the Government to be necessary
for his war production or for the national defense, and which has not been disposed
of, stored or removed 88 provided in 2(d). War contractors will use reasonable
care in the transportation and preservation of plant equipment BO removed and
stored, and will comply with any standardized specifications covering removal, pre-
servation, transportation and storage which may be issued by the owning agency and
will notify the owning agency of the action taken.
6. Initiation of action by owning agencies. -- While the procedures set forth
above assume that the steps looking toward removal of plant equipment will be
initiated by war contractors, it is not intended that the owning agencies will
necessarily delay action until war contractors present liste and data. Whenever
plant equipment is determined by the Government to be excess to the war contractor's
needs for war production, the owning agency, without awaiting a request from the war
contractor, may avail itself of any existing contract rights and. of applicable pro-
cedures, or enter into any additional arrangements which may be required, to cause
such plant equipment to be removed.
7. Cooperation in providing storage. War contractors will be expected to
cooperate in the securing of storage space by making space in their plants avail-
able for storage on suitable terms so long as their production requirements permit.
8. Restoration expenses not to be paid by the Government. -- Except where
the facilities contracts otherwise provide and such provisions have not been super-
seded by agreement of the parties, the Government, in making arrangements with war
contractors under this statement, will not undertake to reimburse or pay any
expenses of restoring, rehabilitating or reconverting the war contractors' plants.
9. Facilities subcontractors. -- War contractors are empowered by certain
outstanding facilities contracts to permit the plant equipment covered thereby to
be installed in the plants of other war contractors (usually under arrangements
which are in form subcontracts under the facilities contracts). In general, the
-44b-
Regraded Unclassified
205
procedures for clearance of plant equipment from the plants of such facilities
subcontractors will be the same as those set forth above, except that lists and
data will be routed to the owning agency through the war contractor with whom
the owning agency has executed the applicable facilities contract, and in the
negotiation of terms (Bec 3) it may become necessary to consider and adjust, among
other things, the rights and obligations of the two war contractors as between
themselves. The owning agencies may issue specific instructions covering this
subject matter and describing the cases, if any, in which the facilities subcon-
tractors may be permitted to present their lists and data direct to the owning
agency.
10. Advance planning. -- It is important that war contractors be made aware
of the functions which they will be expected to assume under this regulation. War
contractors should be encouraged without relaxing war production to , ian ahead for
plant clearance and in particular to work out time schedules for clearance of the
most urgently needed space in their plants. The owning agencies, BO far as their
personnel may from time to time be available for the purpose, will review war con-
tractor's plans for plant clearance to the end that mutually satisfactory mechanics
for handling the problems may be arrived at before substantial amounts of plant
equipment are required to be removed.
ROBERT H. HINCKLEY
Director
September 28, 1944
-45b-
Regraded Unclassified
APPENDIX B EXHIBIT IX
246
OFFICE OF CONTRACT SETTLEMENT
REGULATION NO. 5
Pursuant to the authority conferred upon me by Sections 4(b), 6, and 20(d) of
the contract Settlement Act of 1944, the following policies, principles, methods,
procedures and standards, are prescribed to govern the provision of fair compensa-
tion to war contractors for the termination of fixed-price-war supply contracts;
1. The Statement of Principles for Determination of Costs upon Termination
of Government Fixed Price Supply Contracts, approved by the Joint Contract Termina
tion Board on December 31, 1943, made effective by Directive Orders 1 and 2 of the
Office of War Mobilization, dated respectively January 8, 1944, and February 24,
1944, 18 hereby amended as follows as of the date hereof:
a. To strike from Par. l(f) the words "provided that the amount
to be allowed under this paragraph shall not exceed the adjusted
basis of the facility for Federal Income Tax purposes immediately
prior to the date of the termination of the contract; and provided
further" and to substitute the word "provide3".
b. To strike out Par. 3(e) in its entirety.
2. Accordingly, the Statement, as amended, reads as follows:
The following is the statement of principles for determination of
costs upon termination of Government fixed-price supply contracts
approved by the Joint Contract Termination Board, December 31,
1943, referred to in paragraph (h) of the uniform termination
article applicable to the termination of fixed price supply con-
tracts at the option of the Government:
1. General principles: The costs contemplated by this state-
ment of principles are those sanctioned by recognized commercial
accounting practices and are intended to include the direct and
indirect manufacturing, selling, and distribution, administrative,
and other costs incurred which are reasonably necessary for 'the
performance of the contract, and are properly allocable or ap-
portionable, under such practices, to the contract (or the part
thereof under consideration). The general principles set out in
this statement are subject to the application of any special pro-
visions of the contract. Certain costs are specifically described
below because of their particular significance, and, as in the case
of other costs, should be included to the extent that they are
allocable to or should be apportioned to the contract or the part
thereof under consideration.
(a) Common inventory: The costa of items of inventory which
are common to the contract and to other work of the contractor.
(b) Common claims of subcontractors: The claims of subcon-
tractors which are common to the contract and to other work of the
contractor.
-47b-
Regraded Unclassified
(c) Depreciation: An allowance for depreciation at approp:iate
rates on buildings, machinery, and equipment, and other facilities
including such amounts for obsolescence due to progress in the arts
and other factors as are ordinarily given consideration in determin-
ing depreciation rates. Depreciation as defined herein shall not
include loss of useful value of the type covered by subparagraph (f).
(d) Experimental and research expense: General experimental
and research expense to the extent consistent with an established
prewar program, or to the extent related to war purposes.
(e) Engineering and development and special tooling: Costs of
engineering and development and of special tooling; provided that
the contractor protects any interests of the Government by transfer
of title or by other means deemed appropriate by the Government.
(f) Loss on facilities - conditions on allowance: In the case
of any special facility acquired by the contractor solely for the
performance of the contract, or the contract and other war produc-
tion contracts, if, upon termination of the contract such facility
is not reasonably capable of use in the other business of the con-
tractor having regard to the then condition and location of such
facility, an amount which bears the same proportion to the loss of
useful value as the deliveries not made under the contract bear to
the total of the deliveries which have been made and would have
been made had the contract and the other contracts been completed,
provided that no amount shall be allowed under this paragraph unless
upon termination of the contract title to the facility 1A trans-
ferred to the Government, except where the Government elects to take
other appropriate means to protect its interests.
(g) Special leases: (1) Rentals under leases clearly shown to
have been made for the performance of the contract, or the con-
tract and other war production contracts, covering the period
necessary for complete performance of the contract and such further
period as may have been reasonably necessary; (2) costs of reasonable
alteration of such leased property made for the same purpose; and
(3) costs of restoring the premises, to the extent required by rea-
sonable provisions of the lease; less (4) the residual value of the
lease; provided that the contractor shall have made reasonable
efforts to terminate, assign, or settle such leases or otherwise
reduce the cost thereof.
(h) Advertising: Advertising expense to the extent consistent
with a prewar program or to the extent reasonable under the circum-
stances.
(1) Limitation on costs described in subparagraphs (a), (e),
(f), (g), and (h). In no event shall the aggregate of the amounts
allowed under subparagraphs (8), (e), (f), (g), and (h) exceed the
amount which would have been available from the contract price to
cover these items, if the contract had been completed, after con-
sidering a other costs which would have been required to complete
it.
-48b-
Regraded Unclassified
(J) Interests: Interest on borrowings.
247
(k) Settlement expenses: Reasonable accounting, legal, clerical,
and other expenses necessary in connection with the termination and
settlement of the contract and subcontracts and purchase orders there-
under, including expenses incurred for the purpose of obtaining pay-
ment from the Government only to the extent reasonably necessary for
the preparation and presentation of settlement proposale and cost
evidence in connection therewith.
(1) Protection and disposition of property: Storage, transpor-
tation, and other coste incurred for the protection of property ac-
quired or produced for the contract or in connection with the dis-
position of such property.
2. Initial costs: Costs of a nonrecurring nature which arise
from unfamiliarity with the product in the initial stages of pro-
duction should be appropriately apportioned between the completed
and the terminated portions of the contract. In this category would
be included high direct labor and overhead costs, including training,
costs of excessive rejections, and similar items.
3. Excluded costs: Without affecting the generality of the
foregoing provisions in other respects, amounts representing the fol-
lowing should not be included as elements of cost:
(a) Losses on other contracts, or from sales or exchanges of
capital assets, fees and other expenses in connection with reorgan-
ization or recapitalization, anti-trust or Federal income-tax
litigation, or prosecution of Federal income-tax claims or other
claims against the Government (except as provided in paragraph 1
(k)) losses on investments; provisions for contingencies; and
premiums on life insurance where the contractor is the beneficiary.
(b) The expense of conversion of the contractor's facilities
to uses other than the performance of the contract.
(c) Expenses due to the negligence or willful failure of the
contractor to discontinue with reasonable promptness the incurring
of expenses after the effective date of the termination notice.
(d) Costs incurred in respect to facilities, materials or serv-
ices purchased or work done in excess of the reasonable quantitative
requirements of the entire contract.
4. To the extent that they conform to recognized commercial
accounting practices and the foregoing statement of principles, the
established accounting practices of the contractor as indicated by
his books of account and financial reports will be given due con-
sideration in the preparation of statements of cost for the purposes
of this article.
5. The failure specifically to mention in this statement any
item of cost 18 not intended to imply that it should be included
or excluded.
-49b-
Regraded Unclassified
3. The Statement, as amended, shall be incorporated by reference as soon as
practicable in all new contracts containing the Uniform Termination Article, in
lieu of the Statement as approved by the Joint Contract Termination Board on
December 31, 1943; shall be offered by amendment to all holders of existing con-
tracts containing that Article who contemplate settlement under paragraph (d)
thereof; and shall be used for all other purposes in lieu of the Statement as
approved December 31, 1943.
4. Directive Orders 1 and 2 of the Office of War Mobilization, dated re-
spectively January 8 and February 24, 1944, are hereby continued in effect, except
to the extent specifically amended by this Regulation and by Regulation No. 3 of
this Office.
Robert H. Hinckley
Director
Office of Contract Settlement
September 30, 1944
-50b-
Regraded Unclassified
APPENDIX B EXHIBIT X)
OFFICE OF CONTRACT SETTLEMENT
REGULATION NO. 6
Pursuant to the authority conferred upon me by Sections 4(b),
6, and 20(a) of the Contract Settlement Act of 1944, the following
policies, principles, methods, procedures and standards, are
prescribed to govern the provision of fair compensation to war
contractors for the termination of fixed price war supply contracts.
1. Paragraph 3 of the Statement of Policy concerning Settle-
ment of Claims under Terminated Fixed Price Orders or Subcontracts
for the Manufacture of Supplies under Government War Contracts,
made effe tive by Directive Order 6 of the Office of War Mobiligation,
dated May 29, 1944, is hereby amended by inserting after the fourth
sentence a new sentence reading 88 follows:
"It may be appropriate, if the parties BO desire,
to substitute for the first sentence of para-
graph (a) of Exhibit A a provision for termina-
tion at the option of the buyer, or in para-
graph (b)(2)(11) to reduce the figure of 2%, or to
change the figure 8%, to figures which are fair and
reasonable under the circumstances of a particular
contract."
and by inserting in the fifth sentence, after the words "on the
same date" the words "as amended by Regulation 5 of the Office of
Contract Settlement".
2. Paragraph 4 of this Statement 1e amended to insert, after
the words "Exhibit A" in the last sentence, the words "and settle-
ments arrived at in accordance with paragraph 7 of Regulation
No. 7 of the Office of Contract Settlement".
3. Paragraph 6 of this Statement 18 amended by the addition
at the end of the paragraph of the following sentence:
"In addition to any provision that may be made for the
payment upon certificate, in accordance with the fore-
going principles, of settlements involving $1,000 or
more, the following policy will also apply: Where a
war contractor in good faith approves any settlement
proposal properly submitted to him by his subcontractor
on Form la of the Office of Contract Settiement (for
use in connection with net claims of less than $1,000
where the contractor retains or disposes of all
inventory) the settlement, including credite for retention
or disposal of inventory, will be recognized by the
Government as final and conclusive for the purpose of
settling the terminated prime contract to the extent
that the subcontract 1s allocable to it, unless the
contracting agency has previously caused notice to be
-51b-
Regraded Unclassified
given to the settling war contractor that such settle-
ments made by him with his immediate subcontractors are
subject to approval by the Government."
4. A new paragraph 12 is added to this Statement, as follows:
"12, Notwithstanding the recommendation made in paragraph 3
that Exhibit A be used in subcontracts and purchase orders,
recognition will be given to special agreements by contractors to
pay, as fair compensation for the termination of the subcontract,
amounts specified in the subcontract or to be readily computed
according to specific methods, standards or bases appropriate to
the particular subcontract and set out therein, in lieu of any
other compensation therefor, whenever (1) the available data permits
a reasonable forecast, consistent with sound commercial standards,
of the factors involved in determining what will be fair compensation
for termination in the case of class or cases and (2) such agreement
will substantially facilitate settlement, plant clearance, re-
conversion from war to civilian production or the efficient use of
materials, manpower and facilities or will otherwise promote the
objectives of the Contract Settlement Act of 1944. Such special
agreements may be included in original subcontracts or may be in-
serted in subcontracte by amendment before their termination; and,
when BO included or inserted, are hereby determined to provide a
method for determining fair compensation for the termination of
such subcontracts. Settlements made in accordance with such agree-
ments are subject to review to the same extent indicated in para-
graphs 5 and 6 for settlements made on the basis of the rights and
principles embodied in Exhibit A. The advantages and proper scope
of such pretermination settlement agreements are described in the
statement of the Director of Contract Settlement dated September 25,
1944 announcing General Regulation No. 3 of the Office of Contract
Settlement dealing with the use of such agreements in prime contracts;
and these advantages apply equally to protermination settlement
agreements for use in subcontracts."
5. Exhibit A, attached to this Statement, 18 amended by striking
from the first sentence of paragraph (a) the words ", without the
fault of the buyer",; by inserting after the words "third person"
the words ", including the Government,"; and by inserting after the
word "amended" the words ", BO as".
6. Accordingly, the Statement of Policy, as amended, reads
as follows:
Statement of Policy Concerning Settlement of Claims
Under Terminated Fixed Price Orders or Subcontracts
for the Manufacture of Supplies under Government War
Contracts.
1. Procedures for the expeditious sattlement of subcontracts
on a fair basis are essential. Delay in the settlement of sub-
contracts may impair the ability of the subcontractor to perform
-52b-
Regraded Unclassified
2'9
further war work and would seriously interfere with quick transition
to peacetime production when the war 18 over. The settlement of
subcontracts will be greatly facilitated by the adoption of an
approved form of termination article for use in subcontracts and by
the establishment of uniform general principles governing the settle-
ment and payment of claims of subcontractors.
2, The Uniform Termination Article for Fixed Price Supply
Contracts made effective by order of the Office of War Mobilization
dated 8 January 1944 requires the prime contractor, on notice of
termination, to terminate all subcontracts and purchase orders
chargeable to the contract, except as otherwise directed by the
notice. The Article requires that settlements of subcontracts and
purchase orders made by prime contractors shall be approved or
ratified by the contracting officer only if and to the extent that
the contracting officer may require.
3. It is the policy of the Government to favor the settlement
of first tier or more remote subcontracts or purchase orders on the
basis of the rights and principles embodied in the 'Approved Term-
ination Provision for Use in Fixed Price Orders or Subcontracts for
the Manufacture of Supplies under Government War Contracts' hereto
attached as Exhibit A. Exhibit A is recommended for use in first
tier or more remote fixed price subcontracts or purchase orders for
the manufacture of supplies under Government war contracts.
Exhibit A sets forth in short form the same general principles as
the Uniform Termination Article for use in Fixed Price Supply Con-
tracts made effective by the Office of War Mobilization on 8 January
1944. For the sake of brevity, Exhibit A omits certain provisions
of the Uniform Termination Article which may be appropriate for, and
which contractors may desire to incorporate in, particular subcon-
tracts, as for instance the provision of paragraph (f) for a proper
adjustment, in the case of partial termination, in the price of work
not terminated,
or the provision
of paragraph (g) for partial payments. It may be appropriate, if the
parties BO desire, to substitute for the first sentence of paragraph
(a) of Exhibit A a provision for termination at the option of the
buyer, or in paregraph (b)(2)(11) to reduce the figure of2%, or to
change the figure 8%, to figures which are fair and reasonable under
the circumstances of a particular contract. The Statement of
Principles for Determination of Costs upon Termination of Government
Fixed Price Supply Contracts, made effective by the Office of War
Mobilization on the same date, as amended by Regulation 5 of the
Office of Contract Settlement, will be recognized by the Government
as representing "recognized Commercial accounting practices" as that
term is used in Exhibit A. Other Governmental policies applicable
to the Uniform Termination Article will also be recognized as applying
to Exhibit A, as for example the policy against reimbursing contractors
at the contract rate on termination for completed undelivered
articles which represent unreasonable anticipations of production
schedules, and the policy against taking advantage of technical
defaults when the real reason for termination is the termination of
a prime contract by the Government.
-53b-
Regraded Unclassified
4. It 18 the policy of the Government to encourage the use of
the process of negotiation for settlement of terminated subcontracts
to the same extent as for settlement of terminated prime contracts,
and subject to substantially the same general principles. Such settle-
ments will be reviewed in the manner and to the extent indicated in
paragraphs 5 and 6, and will be approved if found to be fair and
reasonable. The Government reserves the right to determine whether
the basis of the settlement and the amount agreed upon are fair and
reasonable. Settlements based upon reasonable estimates by the parties
of Who aggregate amount which would be due under subparagraphs (1),
(2) and (3) of paragraph (b) of Exhibit A and settlements arrived at
in accordance with paragraph 7 of Regulation No. 7 of the Office of
Contract Settlement, will be considered fair and reasonable.
5. When settlements of subcontracts are submitted to the con-
tracting officer for approval or ratification, they should be treated
like any other element of cost in a prime contractor's settlement
proposal, and procedures determining the extent to which they will
be scrutinized should recognize the necessity for the accomplishment
of speedy and final settlement as well as the protection of the
interests of the Government. A high degree of reliance must and
should be placed upon the investigation made by the contractor of
the basis for the settlement. The procuring agency has, of course,
the right, where circumstances indicate the necessity for 80 doing,
to make full investigation of the settlement of any first tier or
more remote subcontract.
6. If settlements are to be effected with the necessary speed,
it will obviously be impracticable for all procuring agencies to
review every settlement of subcontracts and purchase orders in every
tier. Therefore, whenever and as long as the procuring agency 18
satisfied that the procedures and personnel employed by a prime
contractor in making settlement with subcontractors are edequate, the
procuring agency may provide for the payment of any settlement made
by the prime contractor upon appropriate certificates. Likewibe, in
the case of these intermediate subcontractors, the number of whose
lower tier subcontracts makes it inportant to do so, the procuring
agency, whenever and as long as it 18 satisfied that the procedures
and personnel employed by an intermediate subcontractor in making
settlements thereof are adequate, may provide for the payment of any
sottlement made by the intermediate subcontractor upon appropriate
certificates. In addition to any provision that may be made for the
payment upon certificate, in accordance with the foregoing principles,
of settlements involving $1,000 or more, the following policy will
also apply: Where a war contractor in good faith approves any settle-
ment proposal properly submitted to him by his subcontractor on
Form la of the Office of Contract Settlement (for use in connection
with net claims of less than $1,000 where the contractor retains or
disposes of all inventory) the settlement, including credits for
retention or disposal of inventory, will be recognized by the Govern-
ment as final and conclusive for the purpose of settling the terminated
prime contract to the extent that the subcontract is allocable to it,
unless the contracting agency has previously caused notice to be
given to the settling war contractor that such settlements made by
-54b-
Regraded Unclassified
250
him with his immediate subcontractors are subject to approval by the
Government.
7. The Government in some instances will be under an obligation
either to make reimbursement for, or to assure the defense against,
demands by subcontractors or suppliers chargeable to the prime con-
tract which are greater in amount than would be recognized by the
principles of Exhibit A. On the submission of a settlement which
recognizes any such demand, the procuring agency will decide whether
the settlement should be approved or ratified and whether the Govern-
ment should protect the prime contractor or intermediate subcontractor
from the asserted liability.
8. It 18 the policy of the Government not to delay the making
or approval of settlements after agreement 1e reached for the purpose
of disposing of property chargeable to the terminated subcontract.
When agreement 18 concluded on a financial settlement, title to all
property not theretofore disposed of or taken over should be taken
by or for the account of the Government.
9. This statement deals with the settlement of subcontracts
under the vertical basis of settlement, through the prime contractor
and intervening subcontractors. If methods of direct or horizontal
settlement of subcontracts are adopted, other implementation may be
required.
10. Though Exhibit A is recommended for use in orders or sub-
contracts under Government war contracts, it is recognized that it
may be used in subcontracts or orders having no connection with the
war. The fact that a subcontract or purchase order contains Exhibit
A has, therefore, no bearing on whether the particular subcontract or
order 1e allocable or relates to war production.
11. The requirement of paragraph (a) of Exhibit A that "the
seller will, as and to the extent directed by the buyer**** terminate
work under orders and subcontracts outstanding hereunder" is not
intended to affect the seller's right to allow such subcontracts or
orders to continue to completion, if he desires to do BO for his
own account without making any claim against the buyer by reason
thereof. The buyer's termination notice should make this clear, and
also should specify in 80 far as possible which subcontrects or
orders, or classes of them, the buyer wants completed for his account,
and which he wants cancelled.
12. Notwithstanding the recommendation made in paragraph 3 that
Exhibit A be used in subcontracts and purchase orders, recognition
will be given to special agreements by contractors to pay, as fair
compensation for the termination of the subcontract, amounts spec-
ified in the subcontract or to be readily computed according to
specific methods, standards or bases appropriate to the particular
subcontract and set out therein, in lieu of any other compensation
therefor, whenever (1) the available data permits 8 reasonable fore-
cast, consistent with sound commercial standards, of the factors
involved in determining what will be fair compensation for termina-
tion in the case of class or casee and (2) such agreement will sub-
-55b-
Regraded Unclassified
stantially facilitate settlement, plant clearance, reconversion from
war to civilian production or the efficient use of materials, man-
power and facilities or will otherwise promote the objectives of the
Contract Settlement Act of 1944. Such special agreements may be in-
cluded in original subcontracts or may be inserted in subcontracts by
amendment before their termination; and, when BO included or inserted,
are hereby determined to provide a method for determining fair com-
pensation for the termination of such subcontracts. Settlements made
in accordance with such agreements are subject to review to the same
extent indicated in paragraphs 5 and 6 for settlements made on the
basis of the rights and principles embodied in Exhibit A. The
advantages and proper scope of such pretermination settlement agree-
monts are described in the statement of the Director of Contract
Settlement dated Setpember 25, 1944 announcing General Regulation
No. 3 of the Office of Contract Settlement dealing with the use of
such agreements in prime contracts; and these advantages apply
equally to pretermination settlement agreements for use in sub-
contracts.
7. Accordingly, Exhibit A attached to the Statement of Policy,
as amended, reads as follows:
Approved Termination Provision for Use in
Fixed Price Orders or Subcontracts for the
Manufacture of Supplies Under Government
War Contracts
ARTICLE
,
(a) The buyer may terminate work under this
order in whole or in part at any time by written or telegraphic notice,
whenever (1) the Government requests the termination of this order or
(2) a contract between the buyer and a third person, including the
Government, requiring for its performance articles or services of
the kind or type covered by this order 18 terminated, in whole or in
part, or amended, 80 as to eliminate or reduce such requirements.
Such notice shall state the extent and effective date of such termina-
tion; and, upon the receipt thereof, the seller will, as and to the
extent directed by the buyer, stop work under this order and the place-
ment of further orders or subcontracts hereunder, terminate work under
orders and subcontracts outstanding hereunder, and take any necessary
action to protect property in the seller's possession in which the
buyer has or may acquire an interest.
(b) If the parties cannot by negotiation agree within a reason-
able time upon the amount of fair compensation to the seller for such
termination, the buyer in addition to making prompt payment of amounts
due for articles delivered or services rendered prior to the effective
date of termination, will pay to the seller the following amounts with-
out duplication:
(1) The contract price for all articles or services which
have been completed in accordance with this order and not pre-
viously paid for.
(2) (1) The actual costs incurred by the seller which
are properly allocable or apportionable under recognized com-
mercial accounting practices to the terminated portion of this
-56b-
Regraded Unclassified
251
order, including the cost of discharging liabilities which
so allocable or apportionable, and (11) a sum equal to 2% of
the part of such costs representing the costs of articles or
materials not processed by the seller, plus a sum equal to 8%
of the remainder of such costs, but the aggregate of such sums
shall not exceed 6% of the whole of such costs. For the purpose
of subdivision (11) such costs shall exclude any charge for
interest on borrowings and shall exclude the cost of discharging
liabilities for parts, materials and services not received by
the seller before the effective date of termination.
(3) The reasonable costs of the seller in making settle-
ment hereunder and in protecting property in which the buyer
has or may acquire an interest.
Payments made under this paragraph (b), exclusive of payments under
subparagraph (3), shall not exceed the aggregate price specified in
this order, less payments otherwise made or to be made.
(c) With the consent of the buyer, the seller may retain at an
agreed price or sell at an approved price any completed articles, or
any articles, materials, work in process or other things the cost of
which is allocable or apportionable to this order under paragraph (b)
(2) above, and will credit or pay the amounts so agreed or received
as the buyer directs. AB directed by the buyer, the seller will trans-
fer title to, and make delivery of, any such articles, materials, work
in process or other things not BO retained or sold. Appropriate adjust-
ment will be made for delivery costs or savings therein.
(d) The provisions of this Article
shall not limit or
affect the right of the buyer to terminate this order for the default
of the seller.
8. Directive Order 6 of the Office of War Mobilization, dated
May 29, 1944, is hereby continued in effect except to the extent
specifically modified by this Regulation,
Robert H. Hinckley
Director of Contract Settlement
October 4, 1944
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Regraded Unclassified
APPENDIX B EXHIBIT XI 252
OFFICE OF CONTRACT SETTLEMENT
REGULATION NO. 7
Pursuant to the authority conferred upon me by Sections 4(b) and
6 of the Contract Settlement Act of 1944, the following policies,
principles, methods, procedures and standards are prescribed to govern
the provision of fair compensation to war contractors for the ter-
mination of fixed price war supply contracts:
1. Existing Directives of Office of War Mobilization Prescrib-
ing Termination Provisions for Use in Prime Contracts and Subcontracts.
By Directive Orders 1 and 2, dated January 8, 1944 and February 24, 1944,
the Office of War Mobilization made effective a Uniform Termination
Article for Use in Government Fixed Price War Supply Contracts (herein-
after called the "Price Contract Article"). Paragraph (c) of this
Article provides that the contractor and the contracting officer may
agree upon the amount to be paid to the contractor by reason of the
termination of the contract. Paragraph (d) of the Article thereupon
specifies the basis of determining, for the purpose of court action or
otherwise, the amount to be paid to the contractor in the event of the
failure of the contractor and the contracting officer to agree.
By Directive Order 6, dated May 29, 1944, the Office of War Mobi-
lization made effective an Approved Termination Provision which was
recommended for use in Fixed Price Orders and Subcontracts under Govern-
ment War Contracts (hereinafter called the "Subcontract Article").
Paragraph (b) of the Subcontract Article contemplates that the parties
will seek, by agreement, to determine the amount to be paid by reason
of the termination of the order or subcontract, but specifies the basis
of determining, for the purpose of court action or otherwise, the
amount to be paid to the holder of the order or subcontract in the
event of the failure of the parties to agree. This basie 18 sub-
stantially the same as that specified by paragraph (d) of the Prime
Contract Article.
By Section 20(d) of the Contract Settlement Act the foregoing
Directive Orders remain in full force and effect unless and until
modified as therein provided. The Director of Contract Settlement,
by Regulations 3, 5 and 6, has amended the foregoing Directive Orders
in certain respects and has continued them in effect as amended; and
the references hereinafter made to these Directive Orders, to the
Prime Contract Article, to the Statement of Principles for Determina-
tion of Costs Upon Termination of Government Fixed Price Supply Con-
tracts, and to the Subcontract Article, are to these orders and
documents as BO amended.
2. Policy Determinations to be Made by the Office of Contract
Settlement. The Director of Contract Settlement 1a required, by the
-59b-
Regraded Unclassified
1.
provisions of the Contract Settlement Act of 1944, approved July 1,
1944, to determine (a) what standards should guide the making of
settlement without agreement in order to provide for fair compensa-
tion in accordance with the requirements of the Act; (b) what stand-
ards should guide the making of settlements by agreement in order to
provide fair compensation in accordance with the requirements of the
Act; and (c) to what extent the factors enumerated by Section 6(d)
of the Act should be taken into account in establishing methods and
standards for determining fair compensation in the settlement of
termination claims by agreement.
3. The Formula Provisions. of the Prime Contract Article Provide
Fair Compensation. Paragraph (d) of the Prime Contract Article pro-
vides in brief that, if the parties fail to agree, the contractor shall
receive (subject to the limitations herein stated) the contract price
for accepted completed articles, the cost attributable to the terminated
work and of settling related subcontracts, a profit, and the costs
incident to the termination and to the protection of property. By the
terms of paragraph (h) of the Prime Contract Article, the determinations
of cost required by paragraph (d) are to be made in accordance with the
Statement of Principles for Determination of Coste upon Termination of
Government Fixed Price Supply Contracts approved by the Joint Contract
Termination Board December 31, 1943 (hereinafter called the "Statement
of Cost Principles").
1. Section 6(a) of the Act makes it the responsibility of the con-
tracting agencies andthe Director to provide speedy and fair com-
pensation for the termination of any war contract. Section 6(b) of
the Act requires each contracting agency to establish methods and
standards, suitable to the condition of various war contractors, for
determining such fair compensation, suggests several possible bases
for such a determination, but provides that any other equitable basie
deemed appropriate may be used. Section 6(d) deals with termination
claims not settled by agreement, and provides that in such cases, with
certain exceptions, the method or standard shall take into account an
enumerated series of factors and shall, not include 88 elements of cost
a second enumerated series. Section 6(e) then provides that termina-
tion claims shall be settled by agreement to the maximum extent feas-
ible; that the methods and standarde of determining fair compensation
shall be designed to facilitate settlement by agreement; and that the
Director shall require the contracting agencies to take into account
the factors enumerated in Section 6(d) in establishing methods and
standards for determining fair compensation in settlements by agree-
ment, to the extent that he deems it practicable to do 80 without im-
pending expeditious settlements.
-60b-
Regraded Unclassified
The prodecessors of Section 6(a) and 6(e) of the Contract Settle-
253
ment Act originated in the Judiciary Committee of the House of Repre-
sentatives, which incorporated therein almost verbatim the Statement
of Cost Principles. In reporting the bill, the House Judiciary
Committee said:
"The new provisions are contained in subsections (d) end
(e) of section 6. In preparing these provisions the Committee
has been guided by the uniform contract termination article
recommended by Messrs. Baruch and Hancock and by the cost
principles which are applicable thereunder in cases not settled
by agreement. This uniform termination article is now in-
cluded in new contracts and by agreement existing contracts
are being modified to include it."
The provisions, in this form, were passed by the House.
The Conference Committee changed the provisions of the bill to
the form in which they were finally enacted; and the conference
report states that its purpose in so doing was to revise "this House
provision to state more concisely and in more general terms the costs
to be taken into account for such purpose I establishing methods and
standards for settling claims not settled by agreement/ *
From the foregoing, it clearly appears that the provisions of
Section 6(d) of the Act, defining what shall be taken into account and
what ehall be excluded in establishing methods and standards for
determining fair compensation in cases not settled by agreement, were
based upon the provisions of the Prime Contract Article and the State-
ment of Cost Principles, and were recognized by the Congress as con-
sistent therewith. It further appears, moreover, that Congress desired
to deal with principles of cost determination in a more general manner,
to allow for flexible treatment of the individual items contained
in the Statement of Cost Principles. It 1e accordingly determined
that the method of settlement established by paragraph (a) of the
Prime Contract Article in the event of the failure of the contractor
and the contracting officer to agree provides for fair compensation
for the termination of the contract, and that paragraph (d) of that
Article and the Statement of Cost Principles take into account or
exclude, as the case may be, the several factors enumerated in
Section 6(d) of the Act in accordance with the requirements of that
Section. The contracting agencies will, to the extent provided in
Directive Orders 1 and 2 of the Office of War Mobilization, dated
respectively January 8 and February 24, 1944, use the Prime Contract
Article in new contracts and offer it by amendment, before or after
their termination, to the holders of existing contracts.
4. The Formula Provisions of the Subcontract Article Provide
for Fair Compensation. As recited in the "Statement of Policy Con-
cerning Settlement of Claims under Terminated Fixed Price Orders or
Subcontracts for the Manufacture of Supplies under Government War
Contracts" approved by the Office of War Mobilization in Directive
-61b-
Regraded Unclassified
Order 6 on May 29, 1944, the Subcontract Article seta forth in short
form the same general principles the Prime Contract Article, and
the Statement of Cost Principles will be recognized by the Government
as representing recognized commercial accounting practices as that
term 18 used in the Subcontract Article. It is accordingly determined
that the method of settlement established by paragraph (b) of the
Subcontract Article, if the parties cannot by negotiation agree
upon fair compensation, provides for fair compensation for the ter-
mination of the order or subcontract, and takes into account or ex-
cludes, as the case may be, the several factors enumerated in Sec-
tion 6(d) of the Act in accordance with the requirements of that
Section. The contracting agencies will, to the extent provide in
Directive Order 6 of the Office of War Mobilization dated May 29, 1944,
recommend the use of the Subcontract Article in first tier or more
remote fixed price subcontracts or purchase orders for the manu-
facture of supplies under Government war contracts, and authorize,
approve or ratify amendments of such subcontracts or purchase orders,
before or after their termination, to include the Subcontract Article
5. Standards Applicable to Termination Settlements by Agreement
under the Prime Contract Article. The debates and committee reports
which preceded the enactment of the Contract Settlement Act emphasize
the primary factors to be considered in establishing such standards.
These include the vital need for speed in settlement, the necessity
of negotiating settlements by agreement if adequate speed is to be
attained, and the requirement of sufficient latitude for the applica-
tion of standards of business judgment if negotiation is to take place
successfully. As stated in the Report of the House Judiciary Committee:
"The hearings and reports by the various committees of
Congress which have studied this matter clearly indicate that
the overwhelming bulk of termination claims must be settled
by negotiated agreements if the job is to be done expeditiously
enough to permit rapid reconversion and reemployment at the
end of the war."
"The ability to apply standards of business judgment as
distinct from strict accounting principles 18 at the heart of
the negotiated settlement."
Accordingly, the following conclusions flow from the provisions
of the Act and its legislative history:
The primary test of the methods and standards of settlement to
be established by the contracting agencies pursuant to Section 6(b)
of the Act 18 whether they provide fair compensation. Various methods
of determining fair compensation are to be developed. Fair compensa-
tion 18 inherently a matter of judgment and therefore incapable of
exact measurement. In a given situation, more than one method of
arriving at fair compensation may be appropriate, and differing
-62b-
Regraded Unclassified
254
amounts, within the range of reasonable variations of method and sound
judgment, may all be regarded as constituting fair compensation.
Cost and accounting data, like other criteria for judgment, are to
be regarded as guides to the ascertainment of fair compensation, and
not as rigid measures of it. Settlement by agreement is to be fa-
cilitated to the maximum extent feasible; and the amount of record
keeping, reporting, and accounting in connection with the settlement
of termination claims 18 to be reduced to the minimum compatable with
the reasonable protection of the public interest.
On the basis of the foregoing, the following standards are estab-
lished for the guidance of contracting agencies in the settlement of
claims by agreement, in cases in which the settlement 1e negotiated
on the basis of 8. consideration of costs and profit. AB contemplated
by Section 6(b) of the Contract Settlement Act of 1944, other bases
for such negotiation (e.g. estimated percentage of completion of the
work under a terminated contract) may be developed by the Director
of Contract Settlement or the contracting agencies.
a. General:
The object of the negotiation will be to agree upon a total
amount to be paid in settlement of the contractor's claim which will
constitute fair compensation. The amount agreed upon may be deter-
mined as an entirety, leaving flexibility in the determination of any
particular element entering into the final result. However, in the
consideration of coste and profit as elements of the total amount to
be agreed upon as fair compensation, certain principles should be
observed which are stated in paragraphs (b), (c) and (d).
b. Costs:
(1) The Statement of Cost Principles reflects certain
policy determinations regarding the type of costs which should be
taken into account in determining the compensation to which the con-
tractor is fairly entitled by reason of the termination of his con-
tract for the best interest of the Government. Contractors can prop-
erly expect that their costs of the types described by the Statement
of Cost Principles as includible will be BO taken into account in a
settlement by agreement. Conversely, such a settlement should not
be made the means for reimbursing expenditures of the types which the
Statement excludes.
(2) The contracting agencies will of necessity require
contractors to submit, and will review, relevant information in
support of their claims. This information will include technical
and accounting data to the extent deemed necessary. Cost data
should serve, however, not as a first step in an attempt at an
exact determination of cost but rather as the basis for.a business
negotiation leading directly to a prompt settlement which will be
fair to the contractor and will adequately protect the interest of
the Government. Reasonable estimates and approximations may be used
-65b-
Regraded Unclassified
for the purpose of expediting settlements; and, to the fullest
practicable extent, differences should be compromised and questions
of doubt settled by agreement.
C. Profit:
Profit should be limited to preparations made and work done
for the terminated portion of the contract; but, subject to this
limitation, any reasonable method of arriving at a fair profit may be
used. The most satisfactory criterion of what is a fair profit on the
terminated part of a contract 18 ordinarily a proper proportion of
what the parties have agreed upon. Evidences of this agreement might
be either (a) the amount of the profit which was agreed upon or con-
templated by both parties at the time when the contract was negotiated;
or (b) the amount of profit which the contractor would have earned
had the contract been completed; or (c) the amount of profit which
the contractor agreed to accept in the event the contract was termi-
nated and litigation resulted. Ordinarily, the ascertainment of the
profit which the contractor would have earned had the contract been
completed would involve complicated time-consuming forecasts which
cannot in practice be made with reasonable accuracy; and the most
satisfactory substitute for this criterion will be the amount of
profit which the parties agreed upon at the outset. Accordingly,
the following considerations may be taken into account in arriving
at a reasonable profit, whether determined separately or as part of
a reasonable over-all total.
(1) Where satisfactory evidence is available and it 18
practicable to do BO, one method of arriving at a reasonable profit
on the terminated portion of the, contract is as follows:
(1) Ascertain the dollar amount of the profit which
was agreed upon or was contemplated by both parties at the time when
the contract was negotiated.
(11) Allow to the contractor the portion of this
amount determined by the relation between the work performed by him
on the terminated portion of the contract and the work contemplated
by the entire contract.
(111) The estimate of this relationship does not
necessarily depend on the percentage of the costs incurre on the
terminated portion of the contract to total estimated costs, nor
on the percentage of materials acquired for this portion to total
materials required. While these factors should be considered,
emphasis should rather be put on the extent and difficulty of the
work completed by the contractor (including engineering work, pro-
duction scheduling, planning, technical study and supervision, ar-
rangement and supervision of subcontracts, as well as other services)
as compared with the total work required of him by the contract.
Engineering estimates of percentage of completion should not ordi-
narily be required, although entitled to proper consideration if
available.
-66b-
Regraded Unclassified
254
amounts, within the range of reasonable variations of method and sound
judgment, may all be regarded as constituting fair compensation.
Cost and accounting data, like other criteria for judgment, are to
be regarded as guides to the ascertainment of fair compensation, and
not as rigid measures of it. Settlement by agreement 18 to be fa-
cilitated to the maximum extent feasible; and the amount of record
keeping, reporting, and accounting in connection with the settlement
of termination claims is to be reduced to the minimum compatable with
the reasonable protection of the public interest.
On the basis of the foregoing, the following standards are estab-
lished for the guidance of contracting agencies in the settlement of
claims by agreement, in cases in which the settlement 18 negotiated
on the basis of a consideration of costs and profit. AB contemplated
by Section 6(b) of the Contract Settlement Act of 1944, other bases
for such negotiation (e.g. estimated percentage of completion of the
work under a terminated contract) may be developed by the Director
of Contract Settlement or the contracting agencies.
a. General:
The object of the negotiation will be to agree upon a total
amount to be paid in settlement of the contractor's claim which will
constitute fair compensation. The amount agreed upon may be deter-
mined as an entirety, leaving flexibility in the determination of any
particular element entering into the final result. However, in the
consideration of coste and profit as elements of the total amount to
be agreed upon as fair compensation, certain principles should be
observed which are stated in paragraphs (b), (c) and (d).
b. Costs:
(1) The Statement of Cost Principles reflects certain
policy determinations regarding the type of costs which should be
taken into account in determining the compensation to which the con-
tractor is fairly entitled by reason of the termination of his con-
tract for the best interest of the Government. Contractors can prop-
erly expect that their costs of the types described by the Statement
of Cost Principles as includible will be 80 taken into account in a
settlement by agreement. Conversely, such a settlement should not
be made the means for reimbursing expenditures of the types which the
Statement excludes.
(2) The contracting agencies will of necessity require
contractors to submit, and will review, relevant information in
support of their claims. This information will include technical
and accounting data to the extent deemed necessary. Cost data
should serve, however, not as a first step in an attempt at an
exact determination of cost but rather as the basis for.a business
negotiation leading directly to a prompt settlement which will be
fair to the contractor and will adequately protect the interest of
the Government. Reasonable estimates and approximations may be used
-65b-
Regraded Unclassified
for the purpose of expediting settlements; and, to the fullest
practicable extent, differences should be compromised and questions
of doubt settled by agreement.
C. Profit:
Profit should be limited to preparations made and work done
for the terminated portion of the contract; but, subject to this
limitation, any reasonable method of arriving at a fair profit may be
used. The most satisfactory criterion of what is a fair profit on the
terminated part of a contract is ordinarily a proper proportion of
what the parties have agreed upon. Evidences of this agreement might
be either (a) the amount of the profit which was agreed upon or con-
templated by both parties at the time when the contract was negotiated;
or (b) the amount of profit which the contractor would have earned
had the contract been completed; or (c) the amount of profit which
the contractor agreed to accept in the event the contract was termi-
nated and litigation resulted. Ordinarily, the ascertainment of the
profit which the contractor would have earned had the contract been
completed would involve complicated time-consuming forecasts which
cannot in practice be made with reasonable accuracy; and the most
satisfactory substitute for this criterion will be the amount of
profit which the parties agreed upon at the outset. Accordingly,
the following considerations may be taken into account in arriving
at a reasonable profit, whether determined separately or 88 part of
a reasonable over-all total.
(1) Where satisfactory evidence is available and it is
practicable to do BC, one method of arriving at a reasonable profit
on the terminated portion of the, contract is as follows:
(1) Ascertain the dollar amount of the profit which
was agreed upon or was contemplated by both parties at the time when
the contract was negotiated.
(11) Allow to the contractor the portion of this
amount determined by the relation between the work performed by him
on the terminated portion of the contract and the work contemplated
by the entire contract.
(111) The estimate of this relationship does not
necessarily depend on the percentage of the costs incurre: on the
terminated portion of the contract to total estimated costs, nor
on the percentage of materials acquired for this portion to total
materials required. While these factors should be considered,
emphasis should rather be put on the extent and difficulty of the
work completed by the contractor (including engineering work, pro-
duction scheduling, planning, technical study and supervision, ar-
rangement and supervision of subcontracts, as well as other services)
as compared with the total work required of him by the contract.
Engineering estimates of percentage of completion should not ordi-
narily be required, although entitled to proper consideration if
available.
-66b-
Regraded Unclassified
255
This principle will result in fair compensation in
cases which have involved the arrangement of subcontracts and the
supervision of their performance, by reflecting this work in the
estimate of the extent of completion, while at the same time properly
avoiding the practice of measuring the prime contractor's profit by
the amount of his payments to subcontractore for their termination
claim. This principle will also avoid excessive compensation in
cases where a large proportion of the contractor's coste represents
merely the acquisition of materials not processed by him.
(2) Another method which may be appropriate 18 to approxi-
mate the amount of the profit which the contractor would have been
entitled to receive under the formula in his contract in the event
of the failure of the parties to agree. This will be especially
helpful in cases or classes of cases where it is impracticable to
determine the amount of profit in accordance with principles stated
in subparagraph F7), or where payment of this approximation of the
formula will increase speed of settlement, or where it appears that
the contractor would have failed to realize a profit in the event of
completion of the contract.
d. Overall Considerations:
To avoid forcing the contractor to unnecessary litigation
to establish his legal rights against the Government, it will be
appropriate in any case, where the contractor BO desires, to pay
the amount of the approximation of the formula.
As indicated in the case of settlements in the absence of
agreement, the gross amount of the settlement (exclusive of sums paid
A8 compensation for post-termination expenses and services) should
not exceed the contract price, less payments otherwise made or to
be made to the contractor. This amount is subject to proper deduc-
tion for advance or partial payments or other items in accordance
with any applicable provisions of statute or contract, as for example
paragraph (e) of the Prime Contract Article.
6. Standards Applicable to Termination Settlements by Agreement
Under Prime Contracts not Containing the Prime Contract Article.
Directive Orders 1 and 2, dated January 8 and February 24, 1944, require
the contracting agencies, with the exceptions therein stated, to use
the Prime Contract Article in future contracts and to offer to their
existing contractors an opportunity to amend their contracts to in-
clude the Article. In cases where contracts not containing or
amended to contain the Article are terminated for the convenience
of the Government, the principles stated in paragraph 5 should never-
theless be applied in making settlements by agreement, to the extent
not inappropriate in the light of the provisions of the particular
contract.
7. Standards Applicable to the Settlement by Agreement of
Terminated Subcontracts. Directive Order 6, dated May 29, 1944,
-67b-
Regraded Unclassified
provides in part the criteria to be used by the contracting agencies
in approving the settlement of terminated subcontracts. That
Directive Order provides, among other things, that it 18 the policy
of the Government to encourage the use of the process of negotiation
for the settlement of terminated subcontracts to the same extent as
for the settlement of terminated prime contracts, and on the basis
of substantially the same general principles; that such settlements
will be approved if, upon review 88 provided in that Order, they are
found to be fair and reasonable; and that settlements based upon
reasonable estimates by the parties of the aggregate amount which
would be due under the formula set out in paragraphs (1), (2) and (3)
of paragraph (b) of the Subcontract Article will be considered fair
and reasonable.
Section 6(a) of the Contract Settlement Act provides that
fair compensation for the termination of subcontracts shall be based
on the same principles 88 compensation for the termination of prime
contracts. Accordingly, the contracting agencies shall approve or
provide for the approval of subcontract settlements (in addition to
the circumstances set forth in Directive Order 6) when such settle-
mente are made upon the principles of peragraph 5 of this Statement
of Policy. However, since the contracting agency will not ordinarily
have participated in the negotiation of the original subcontract, the
constracting agency where consideration 18 given to the factors set
forth in paragraph 5(c) may, elect to take into account the profit
which the contracting agency would have agreed to pay in connection
with a direct procurement of the same or a similar item rather than
a profit determined in accordance with paragraph 5(c).
8. Determination required by Section 6(e) of the Act. It is
hereby determined that to the extent that it is presently deemed
practicable to do BO without impeding expeditious settlements, the
provisions of paragraphs 5, 6 and 7 of this Statement of Policy re-
quire the contracting agencies to take into account the factors
enumerated in Section 6(d) of the Act in establishing methods and
standards for determining fair compensation in the settlement of
termination claims by agreement.
9. As contemplated by the Act, modifications may be made from
time to time in thie Regulation.
Robert H. Hinckley
-68b-
Regraded Unclassified
256
APPENDIX B EXHIBIT XII
OFFICE OF CONTRACT SETTLEMENT
(Regulation No. 8)
October 13, 1944.
Pursuant to the authority conferred upon me by
Section 4 (b) of the Contract Settlement Act of 1944,
the attached forms, designated thereon Office of Con-
tract Settlement forms 1, la, 1b, 2a, 2b, 2c, 2d, and 3,
are hereby prescribed for use by all government agencies
in connection with the settlement of claims under termi-
nated fixed-price war supply contracts in accordance with
"Instructions for use of Standard Contract Settlement
Proposal Forms" hereto attached.
ROGER L. PUTNAM,
Acting Director.
-69b-
Regraded Unclassifie
APPENDIX # EXHIBIT X11-8
257
- 2990
INSTRUCTIONS
FOR USA OF
STANDARD CONTRACT SETTLEMENT
PROPOSAL FORMS
GENERAL
SETTLEMENT PROPOSAL
L Standard Forms Provided-The Standard Forms
9. Banis of Presenting Proposal-Form 1 may be
are prescribed by the Director of Contract Settlement
used for any settlement proposal, other than one on the
under the Contract Settlement Act of 1944. They are
total cost basis, regardless of amount. It is designed
required to be used by all prime contractors and subcon-
for presenting proposals on the inventory baris, which
tractors In submitting proposals for settlement of claims
should be used wherever practicable. Under this basis
under terminated fixed-price war supply contracts.
the settlement proposal will consist essentially of an
This includes fixed-price supply subeontracts underly-
inventory of individual Items or groups of similar items
ing cost-plus-fixed-fee prime contracts or subcontracts.
stated at cost, In three cases where the inventory
The forms should be used by prime contractors for filing
method is not practicable, contractors may present their
with the Government, and by subcontractors for filing
proposals on the total cost baris, Under this method,
with the company from which the notice of termination
the accumulated costs applicable to all work done on the
was received. They have been made uniform for all
contract are summarized; profit, if any, in added, and
Departments and agencies of the United States Govern-
any amounts previously invoiced or to be invoiced for
ment in order to expedite preparation and review of
finished product are then deducted. Form 1b, designed
settlement proposals. Previously authorized forms of
for presenting proposals nn the total cost basis, may be
the War Department or Navy Department may con-
obtained from any Government contracting agency on
tinue to be used until the Standard Forms are generally
request. When using this form, a contractor must,
available.
however, for purposes of property accountability and
2. Departures from Standard Forms-Although
disposition, submit Termination Inventury Schedules
minor deviations from the requirements of the forms
listing all the inventory items for which amounts are
are permissible, prior approval of the contracting officer
included in the total costs presented in the Settlement
or the customer (contractor in next higher tier) should
Proposal. The Contract Settlement Act of 1944 au-
be obtained for any substantial departures from the re-
thorizes the use of any other equitable basis deemed
quirements. However, a contractor receiving such
appropriate by the contracting agency for determining
approval may not require his subcontractors to submit
fair compensation for the termination of war contracts.
their proposals on other than the prescribed standard
When using any such other method, the contractor
forms. Submission of additional information which the
should consult his customer or the contracting officer
contractor considers relevant is encouraged and may
concurning the manner and form of presenting it.
expedite review and approval of the proposal. As used
9. Separate Proposals for Separate Contracts-A
in these Instructions, the term "contracting officer" in-
separate proposal should ordinarily be submitted for
cludes the contracting officer's representatives.
each terminated war contract or purchase order unless
3. Where to Obtain Forms-The forms may be ob-
nothe other procedure is approved by the contracting
tained from any Government contracting agency and
officer or customer. Claims based on a series of orders
the larger war contractors.
from the same purchaser for items applicable to the
4. Reproduction of Forms. Reproduction of the
same contract may, however, be combined in a single
forms in any size is authorized, without approval of any
proposal.
Government agency, provided DO change is made in the
10, Interim Proposals-Normally, a proposal when
general arrangement. Reproduction of the inventory
submitted should cover all elements of the claim, includ-
schedules on larger forms is encouraged where desired.
ing the contractor's own charges and settlements with
subcontractors. However, proposals may be filed in
SHORT FORM SETTLEMENT PROPOSAL
successive steps covering separate portions of a claim
(Form la)
arising from the termination. Except with the ap-
5. This form may be used only where:
proval of the customer or contracting officer, this system
(a) the contractor proposes to dispose of or retain
of progressive reporting should not be used to present
all the inventory allocable to the terminated
claims covering portions of the contractor's own costs
portion of the contract, and
25 they may be determined Rather, it is intended to en-
(b) the net amount of the proposed settlement,
able the contractor to file proposals covering either all
after deducting his offer for the entire in-
his own costs, or his settlements with subcontracture,
ventory (including proceeds of sales of any
or his settlement expenses. In submitting an interim
inventory disposed of) is less than $1,000.
proposal, the contractor should complete only those pur-
tions of the form applicable to his proposal: for example,
6. Neither the inventory schedules (Forms 2a, 2b, 2c.
in submitting a proposal to cover settlements or pro-
and 2d) nor the Schedule of Accounting Information
posed settlementa with subcontractors. he should fill
(Form 3) are to be submitted with this form. The back
out, in addition to the boses at the tap of the form, only
of the form contains instructions for its use. Also see
Schedule F and Item 14, and execute the certificate at
Miscellaneous Instructions on page a hereof.
the bottom of the form. Interim proposals may also
OTHER FORMS
be filed in connection with requests for partial payments.
In submitting an initial proposal, amounts should be in-
7. The other forms are as follows:
serted only in column 4, and the required supporting
(a) Settlement Propesal
schedules be completed. In filing subsequent proposals,
Form 1-General form, which may be used
the schedules should be completed in support of the
for any proposal, other than one on the
items in column 3, or if this is not feasible, a revised
total cost basis, regardless of amount.
schedule should be prepared in support of the accumu-
Form Ib-Total cost basis form, for use
lated totals in column 4.
only where it is necessary to present the
proposal on the total cost basis. This
11. Individual Items of Form 1:
form is not generally distributed but will
Settlement Expenses-Item 12-These are some-
be provided by any Government contract-
times referred to as post-termination expensés. They
ing office on request.
include reasonable accounting, legal, clerical, and
(b) Termination Inventory Schedules
other costs and expenses incident to termination and
Form 2a-Metals (in mill product form).
settlement of the contract or order, and reasonable
Form 2b-Raw Materials (other than
costs and expenses of preserving and protecting ter-
metals), Purchased Parts, Finished Com-
mination inventory.
ponents, Finished Product, and Miscél-
Settlements With Subcontractors-Item 14-The
laneous.
war contractor submitting a settlement proposal
Form 3e-Work in Procuss.
need attach settlement proposals of his subeontrac-
Form 2d-Dies, Jigs, Fixtures, etc., and
tora only in cases where such settlement proposals are
Special Tools.
required by Covernment regulations to be reviewed
(c) Schedule of Accounting Information
or examined by the contracting officer or a Govern-
Form 3-This form is provided to facilitate
mont review board, or where the contracting officer or
accounting reviews of settlement pro-
customer so directs.
posals, and, wherever possible, to enable
Acceptable Finished Product-Item 15.-Normally
the review to be made without field exam-
prime contractors will be authorized to obtain pay-
instion.
ment for acceptable finished product on hand at date
-71b-
Regraded Unclassified
or termination by invoicing at the contract price, and
retain or dispose of all euch items at the best price ob-
such product will not be reported un the inventory
tainable. In the case of items retained by the contractor
forms or be included in the proposed settlement. Sub-
this means a price which in his judgment is fair and
contractors should similarly seek to obtain payment
reasonable and not less than the price he would obtain
for acceptable finished product on hand at the date
If the item were offered for sale. His insertion in cul-
of termination through regular billing procedure.
una 8 of the Inventory Schedules, or in Schedule G of
Where, however, such payment is not obtained (solely
the Settlement Proposal, of amounts in respect of such
because of the termination), the Items should be
items will constitute his representation that such
listed on the appropriate inventory schedule (Form
amounts are in bie judgment the best prices obtainable,
2b). the contract price should be entered instead of
as that phrase is used above. No approval of such
cost in the cost column, and the items included at con-
prices by the customer or the contracting officer will be
tract price in the settlement proposal. If the contract
required.
price is a delivered price, freight and other charges
17. Common Items-Items which are renamably
which would have been payable by the contractor had
usable on other work of the contractor because they are
delivery been completed should be deducted.
materials, parts, or components, common in nature to
Allowance for Interest-Item 16.-The Contract
both the terminated contract and other work of the con-
Settlement Act of 1944 provides for allowing interest
tractor, should not be listed, nor should any costs with
on the amount due and unpaid from time to time on
respect thereto be included in the proposal, to the extent
the termination claim at the rate of 216 percent per
that the items are reasonably applicable to the contrac-
annum for the period beginning 30 days after the date
tor's other work in accordance with regulations of the
fixed for termination and ending with the date of final
contracting agency.
payment, with certain exceptions stated in section
18. Classification of Items-To aid in solling or stor-
6 (f) of the Act. For guidance in computing the in-
ing property which is to be removed from the contrac-
terest to be allowed, reference is made to regulations
tor's plant by the Government, A classified arrangement
of the various contracting agencies.
of the items on the inventory schedules is essential.
Disposal Credits-Item 18.-This item represents
Except in the case of work in process and of items
amounts by which the contractor's proposal should
having no commercial value, like Items are required to
be reduced on account of (1) the contractor's offers
be listed with like items and, with certain exceptions, a
to retain or sell Inventory items, and (2) the proceeds
separate sheet must be used for each classification of
of authorized sales (Including credits for authorized
property at any one location. Instructions for arrang-
retentions). The amount entered on Schedule C in
ing the items on the Inventory Schedules are given in
the first proposal filed should agree with the total of
Appendix A hereto and must be closely followed.
the contractor's offers and the proceeds of authorised
19. Submission of Termination Inventory Schedules
sales shown in column 8 on all the inventory scheduler,
and Obligation of Government le Remove Property.-
If a subsequent settlement proposal is filed, increases
These schedules will serve as the contractor's statement
or decreases in the amount of the disposal credita
showing the material claimed to be termination inven-
need not be supported by revised inventory Schedules,
tory which, if not otherwise disposed of or covered by
but adjustments should be explained in Schedule G.
agreement, he desires to have removed by the Govern-
If practicable, the part of the disposal credit applica-
ment. The obligation of the Government under the
ble to acceptable finished product included in the pro-
Contract Settlement Act of 1944 to remove or arrange
posal should be shown separately in Schedule G.
for storage of any such items will not arise until 60 days,
12. Supporting Inventory Schedules.-Items 1
or such other time as may be agreed oti, after the Ter-
through 7. and Item 15, must be supported by the inven-
mination Inventory Schedules on which they are listed
tory schedules described below.
are received in satisfactory form by the appropriate
TERMINATION INVENTORY SCHEDULES
Government officer in such manner as may be pre-
scribed. In the case of a prime contract, the appropri-
(Forms 2a, 2b, 2c, and 2d)
ate Government officer is the contracting officer, or his
13. When Used-These achedules, which are filed
representative", administering the contract, or such
either with or in advance of the Settlement Proposal
other representative as the contracting agency may
(other than the Short Form) serve two principal pur-
designate. In the case of a subcontract, it is the con-
poses: (1) To support the amount of inventory costs
tracting officer, or his representative*, administering
included in the Settlement Proposal: and (2) to aid in
the prime contract under which the submittract is ter-
arranging for the removal, storage, sale, or other dis-
minated, or such other representative as the contracting
position of the termination inventory.
agency may designate, Both the description and clas-
14. Partial Inventories-Where inventory schedules
sifiention required by these instructions are necessary
covering a substantial portion of the inventory can be
for satisfactory form. Schedules will not be deemed
prepared in advance of other portions, partial filings are
unsatisfactory in form with respect to Items under $100
encouraged in the interest of expediting property re-
cost merely because they are lumped under a "sundry"
moval and disposal.
caption in accuedance with paragraph 16 above, pro-
15. Description-Column 2-On Form 2a (Metals)
vided the contractor files a supplementary Termination
full commercial description is required for all items.
Inventory Schedule or Schedules with respect thereto
On all other inventory schedules full commercial de-
which are in satisfactory form and meet the following
scription is required only for items believed to have
conditions: (1) that they be received by the appropriate
commercial value. For other items, the contractor
Government officer at lenst 20 days (or such other time
furnish only such description as is sufficient to enable
as the contracting agency may prescribe) before the
the contracting officer or customer, as the case may be,
obligation of the Government would arise to remove
to determine the appropriate disposition. This may in-
or arrange for storage of the items in the "sundry" cap-
volve ascertaining whether the items can be used else-
tion, (2) that there be listed any such items which have
where in the procurement program, or passing upon
not by that time been disposed of and are to be tendered
scrup recommendations or offers to purchase. The more
to the Government, and (3) that such Items be de-
limited description required for these purposes will
scribed and classified in accordance with paragraphs 15
ordinarily suffice in the case of most special parts, most
and 18 above.
special tools, dies, Jigs and fixtures, and most work in
20. Option To Submit Unclassified Schedules-Sub-
process, Where the contractor is in doubt as to the ex-
ject to the conditions stated below, contractors who
tent of the description required, he should consult with
desire to do an may prepare and submit the Termination
the contracting officer or the customer who may accept
Inventory Schedules without classification of the items.
such description as he thinks satisfactory under all the
This may make possible an earlier submission of the
circumstances. The "Handbook of Standards for De-
Settlement Proposal and may enable the contractor to
scribing Surplus Property" compiled for the disposal
avoid classification of items which will in fact be
agencies of the Government, will be made available by
scrapped, retained, or otherwise disposed of without
contracting agencies to war contractors. It will be help-
transfer to the Government. Schedules BO submitted
ful as n. guide to the type of information needed for a full
to the contracting officer or his representative will not,
commercial description.
however, be deemed to be satisfactory in form, as that
16. Sundry Listing of Smell Amounts-Itema having
term is used in paragraph 19 above, and the 60-day
a cost of less than $100 need not be listed separately but
period there referred to will not commence to run with
may be lumped together under a "sundry" caption with
respect to any of the items included on them until sup-
only a general description of the type of items, provided
plementary schedules containing the required classified
the aggregate amount included does not exceed $5,000,
listing of such items are received by the appropriate
or 20 percent of the total inventory cost, whichever is
Government officer.
less. For this purpose. the term "item" means all the
*16 the --- of the Navy Department Name Maintal end other
substantially similar articles in the termination inven-
- - - dispossiblem Incryance will mail - the
- - administration - - - the registrative of the
tory at any one location. Contractors are urged to
metrading ofter for this pursons
-726-
Regraded Unclassified
21. Condition-Column 1-For purposes of indicat-
with a previous termination. in the latter case a state-
258
ing condition of material, other than work in process,
ment showing any changes in accounting information
the following code should lie used. It requires the com-
from that net forth in the previously filed Form IN will
bination of a letter and a number in each Instance (as
be sufficient.
E4 or N2).
MISCELLANEOUS INSTRUCTIONS
N-New
1-Excellent
28. Cents May Be Omitted.-In any of the forms,
E-Used-reconditioned
2-Good
cents may be omitted, either by dropping them entirely
O-Us :-usable without repairs
8-Fair
or by stating the amount at the tearnet dollar, except
R-Ussi-repaire required
4-Poor
in the case of the unit cont column (col. 5) of the Inven-
Use the letter "X," without a number, for material con-
tory Schedules-
sidered to have no further value for use as originally
29. Separate Bebedules.-If the space provided for
intended, but of possible salvage value other than as
any information called for by any of the forms la Insuffi-
scrap.
cient, attach separate supporting schedules.
22. Costs-Columns 5 and 6.-Any generally recog-
50. Number of Coples-The number of copies re-
nized basis for costing inventory may be used, providing
the system has been regularly in use by the contractor
quired of any of the forms will be indicated by the Gov-
ernment contracting agency or the contractor from
and reasonably reñects his costs, In some cases, par-
whom notice of termination is received.
ticularly where a settlement proposal in filed on the total
cost basis, complete conting of inventory schedules may
31. Retention of Recorda-Attention is called to
not be possible: in such cases, however, the contractor
Section 19 of the Contract Settlement Act of 1944, which
should give as much cost information as practicable,
with certain exceptions requires contractures to retain
particularly with respect to items of inventory other
their records and working papers for five years after
than work in process. Where the contractor's system
(1) disposition of termination inventory, or (2) final
of accounting makes it impracticable to determine unit
settlement of the war contract, or (3) termination of
costs for each Item of inventory, it is permissible to
hostilities in the present war, whichever is latest. At-
enter total costs for all of the items or for groups of
tention is also called to the provisions of Section 19 of
similar items. Estimated costa should be given where
the Act imposing penalties for filing fraudulent claims.
actual custs are not available.
82. Deliveries to Government may be Required-
23. Scrap Recommendation-Column T-A contrac-
Contractors will be advised, usually in the Notice of Ter-
for should make scrap recommendations by inserting an
mination, of any portions of the termination inventory
"S" in column 7.
which the Government requires to be delivered to it.
24. Contractor's Offer, or Proceeds of Authorized
33. Approval of Proposals Filed on Form la (Short
Sale-The letter "C" inserted after the dollar amount
Form),-Where a war contractor in good faith approves
in column 8 will indicate the contractor's offer to retain
any settlement proposal properly submitted to him on
or sell, and the letter "A" BU inserted will indicate a sale
Form la by his immediate subeontractor, the settlement,
(or credit for retention) previously authorized or ap-
including credita for retention or disposal of inventory,
proved by or on behalf of the contracting officer or cas-
will be recognized by the Government as final and con-
tomer. In either case quantity should also be shown
clusive for the purpose of settling the terminated prime
(on a second line) If less than the full quantity shown
contract, to the extent the subcontract is allocable to it,
in column 4.
unless the contracting agency has previously caused
notice to be given to the settling war contractor that
25. Inventory Certificate Required.-The Inventory
such settlements made by him are subject to approval
Schedules, whether or not filed with the Settlement Pro-
by the Government.
posal, must be accompanied by a certificate in the form
set forth in Appendix B hereto. When the procedure
34. References-For guidance in preparing Settle-
authorized in paragraph 20 la followed, the second para-
ment Proposals reference is made to the termination
graph of the form of certificate should be omitted.
article of the contract, the Contract Settlement Act of
1944, and the regulations and instructions of various
26. Government-Dwned Property-Whenever Gov-
Government contracting agencies, and of the Director
ernment-owned property is listed on the Termination
of Contract Settlement.
Inventory Schedules, separate sheets should be used,
marked to show that the items are Government-owned,
35. Changes in Instructions-These instructions are
and the schedules should be filed with the authorized
subject to change by notice published in the Federal
Government representative as that term in used in para-
Register.
graph 19 above.
APPENDIX A
(a) Termination inventory to which the Government
Classifying Items on the Inventory Schedules
has title under foced-price contracts should be listed on
GENERAL
the Termination Inventory Schedules as follows:
1. Why Classification Required.-Inventory Sched-
(1) Government-owned materials furnished under
ules will not be considered to be in satisfactory form for
the terminated contract without cost to the contrac-
the purposes of the 60-day period referred to in para-
tor (sometimes called "Government-furnished mate-
graph 19 of Instructions above unless the items are ar-
rials" or'Government-furnished equipment") should,
ranged in general groupings on separate sheets in
for purposes of property accountability and disposi-
accordance with the following instructions. This pro-
tion and not as a part of the settlement proposal, be
cedure is prescribed in order to facilitate removal from
listed unless the contracting officer directs otherwise.
the contractor's plant and disposal of property listed on
the Inventory Schedules and to meet the requirementa
(2) Where under a fixed-price supply contract,
of the disposal agencies. Contractors are urged to fol-
title to materials purchased by the contractor is
low the instructions carefully in order to avoid delays in
vested in the Government, such materials should be
clearing their plants.
listed, and cost data supplied to the extent required
under paragraph 22 above.
2. Classification Distinguished From Description.-
These instructions concerning classification apply solely
(b) Government-owned facilities should not be listed
to the arrangement of items on separate inventory
on the Termination Inventory Schedules unless the con-
abnets and in no way affect the requirements for descrip-
tracting agency or the contracting officer so directa,
tion of the items, act forth in paragraph 15.
(e) Although these Instructions relate to fixed-
3. When Classification Required.
price supply contracts, termination inventory under
cost-plus-fixed-fee cuntracts may also be listed OB the
On Form 2a-Metals -Classification required
for all items.
Termination Inventory Schedules if the contractor
desires, and shall be 50 listed if required by the contract-
On Form Ze-Work in -No classifiestion N-
ing agency,
Process
quired.
On Form 2b-Raw MA-
-Classification required
SCHEDULE OF ACCOUNTING INFORMATION
terials (other than
for items believed to
(Form 3)
metals); Purchased
have commercial
27. Form 3 is intended to facilitate accounting n-
Parts; Finished Com-
value: items having
views and particularly to obviate the necessity of many
ponents; Finished
Product; Miscellane-
no commercial value
field examinations which might otherwise be required.
It should be filed only once in connection with each ter-
ous.
may be placed in a
mination. It is not required if (1) the proposal is sub-
On Form 2d-Dies, Jigs,
single classification
mitted on the Short Form (Form 1a), or (2) filing of
Fixtures, etc., and
designated "No
Form S has been waived by the contracting officer or
Special Tools.
Commercial Value."
customer, or (3) the contractor has already filed a Form
Description is, however, required in all instances in
3 with the contracting office or customer in connection
accordance with paragraph 15 of the Instructions.
-736-
Regraded Unclassified
4. Instructions for Classifying-For metals (in mill
Note that on this form Items having au commercial
product form) and raw materials, that Items of one
value may be placed in a single classification designated
material with time of the same material. For all other
"No Commercial Value," and to further classification of
products, list like items with like items, Each group
such Items is required. For items deemed to have com-
will then comprise a enparate classification of property.
mercial value, use A new sheet for each classification
See examples before.
(except as permitted under paragraph 6 above). Insert
5. Write in the top right-hand corner of each inven-
the name of the classification in the top right-hand cor-
tory about opposite "Property Classification" the name
nor of the Inventory form and arrange the items falling
of the classification for which the sheet is used. For
under that classification in sequence under separalasub-
example, in the case of Metals the name of the metal:
headings. For example, on the sheet or sheets used to
in the case of Haw Materials (other than metals), or of
list Chemicals, group separately all Acids, all Alkalis, all
Parts, Finished Components, Finished Product, or Mis-
Resins, etc. Under the general classification of Insu-
cellaneous, the name by which the material or article is
lated Wire and Cable, group separately all Asbestos-
commonly known in the trade.
Insulated Copper Wire, all Rubber-Insulated Copper
6. Use a new sheet for each such separate general
Wire, all Magnet Wire, etc. On the sheets used fur
classification. In the case of small inventories or classi-
Drugs, group separately all Antitoxins, all Vaccines, all
fications having only a few items, however, several dif-
Strychnine Derivatives, all Morphine Derivatives, etc.
ferent classifications may be put on the same page,
provided they are separated by at least three spaces,
10. On Form 2c-Work in Process.
and the name of each classification is written in the top
right-hand corner of the form.
No classification of items is required on this schedule,
7. Option To Submit Unclassified Schedules-See
However, a description must be given sufficient to en-
paragraph 20 of the Instructions concerning filing in-
able the Government representative to identify the
ventory schedules without classification of the items,
property and determine the appropriate method of dis-
and the effect thereof on any obligation of the Govern-
posal. Finished components should not be listed on this
form but on Form 2b. Other materials which have not
ment under the Contract Settlement Act of 1944 to re-
move or arrange for storage of the Items listed.
lost their identity through whole or partial assembly
and which are deemed to have a further commercial use
INDIVIDUAL FORMS
should similarly be listed on Form 2b.
8. On Form 2a-Metals (in mill product form, exclud-
ing castings and forgings).
11. On Form 2d-Dies, Jigs, Fixtures, etc., and Spe-
List metals in raw or primary form ns furnished by
cial Tools.
the mill and on which there has been no subsequent
Note that on this form items having no commercial
fabricating operation. Do not include castings and forg-
value may be placed in a single classification designated
ings. They are to be listed un Form 2h. Except where
"No Commercial Value." Such items require no further
there are only a few items, use a new sheet or series of
classification. For items deemed to have commercial
sheets for each type of metal, and write the name of the
value, general classifications may be limited to the
metal or alloy in the space provided in the upper right-
following:
hand curner of the form. Examples are:
Alloy Steel
Copper
Aluminum
Dies Jigs Gauges Fixtures Special tools
Carbon Steel
Free Cutting Brasa
Silver
Stainless Steel
Manganese Bronze
Tin
Use & new sheet for each such general classification
In addition, on the sheets for any such metal, list like
(except as permitted under paragraph 6 above). Insert
forms of the metal or alloy together in sequence. For
the name of the classification in the top right-hand cor-
example, on the sheet or sheets used to list Carbon Steel,
ner, and list the Items falling under that classification
group together all the strip, then follow with the sheets,
in sequence. For example, on the sheet used to list
then the bar stock, etc.
Dies, group separately all Extruding Dies, all Forging
9. On Form 2b-Raw Materials (other than Metals):
Dies, all Forming Dies, etc. On the sheet used for
Purchased Parts; Finished Components: Finished
Gauges, group separately all Thread Gauges, all Radius
Product: and Miscellaneous.
Gauges, all Depth Gauges, etc.
The term "Raw Materials" is here used to include
materials in primary form. Examples of the many dif-
12. If perishable taols are charged to indirect factory
forent general classifications of raw or primary mate-
expense, they may net also be included in termination
riala (other than metals) include:
inventory. Where, however, indirect factory expense
Chemicals
Lumber
Textiles
is adjusted to exclude such a charge, or where the per-
Pulp and paper
Hides and skins
Cotton
ishable tools are charged directly to the contract, they
Paper board
Leather
Kapok
Plastics (primary forms)
should be included in the Inventory, but should be listed
Shoe cut stock
Wool
on Form 2b and not 2d.
Oils, fats, waxes
Cement
Hair
Rubber
Cork
Glal
13. List separately when In doubt. Extreme care
Examples of some of the large number of general classi-
fications of parts, components, finished product, or
should be used to list only very similar Items together
miscellaneous include:
as a single classification. If doubt exista M to.the proper
Engines and turbines
Bearings
classification of any item, list that item separately and
Compressors and pumps
Valves
insert the commonly accepted trade name at the top
Insulated wire and cable
Surgical instruments
right-hand corner of the page. Where forms overlap,
Nuts and bolte
Electric motors
the contractor may use the form best suited, except that
Conveyors
Drugs
finished components should be put on Form 2b and not
Fana and blowers
Ignition equipment
on Form 2c.
APPENDIX B (See Instructions, par. 25)
Form of Termination Inventory Schedule Certificate
The contractor hereby ortifes that the attached Termination Inventory Schedules, pages
to
inclusive, have
been prepared in accordance with applicable Instructiums, that the Inventory described therein la allocable to the designated contract
and is located at the places specified; that the quantities are not in excess of the reasonable quantitative requirements of the ter-
minated portion of the evetract; and that the prices shows in culumn 8 (entractor's offer. or proceeds of authorised sale) are fair
and reasonable and comply with Government price regulations.
The attached Schedules constitute the contractor's statement showing the materials claimed to be termination Inventory which,
if not otherwise disposed of, the contractor desires to have removed by the Government within 60 days from receipt hered by the
Government, or such shorter period - may be prescribed under the Contract Settlement Act of 1944, or euch other period se may
be agreed upon. Subject to each prior disposition, title to such materials is bereby tendered to the Government and la warranted to
be free and clear of all liene and encumbrances.
Upon request of the Government, the contractor (will) (will bot) regutiate to store at the Government's expense all or part of
the Inventory listed in the attached Schedules.
(Strike en me)
The supervisory assounting ufficie) in
(Name of -
By
(Theme of authorized offor)
(Signature)
(Titia)
(Title)
(Data)
These instructions have been - the Bursan of the Buigrt in with the Poleral Reperts An of 1942.
-746-
Regraded Unclassified
259
APPENDIX - EXHIBIT X11-8
Form Agreemed,
1 I ! /
(2nd fastructions for Use of Standard Contract Settlement Proposal Formal
Form 1
Orma of Comman
SETTLEMENT PROPOSAL
For Use by Prime Contractor or Subcontractor Under Terminated Fixed-Price War Supply Contract
This proposal applies to (check ase):
A prime contract with the Government, or
(Company)
Aubeontract or purchase urder No(s).
(Sime)
with
(Nama of setradar who - Natio of Termination)
(City)
(Mote)
(Addres)
Govt. Agency
If moneys payable under the contract have been assigned, give name
Govt. Prime Contract No.
and address of assignee
Contractor's Reference No.
Effective date of termination
la Form 3 (Schedule of Accounting Information)
attached? If not, explain
Yes
No
This la proposal No.
under this termination and la doemed to be
interim, or
final. (Check one)
Status of Contract or Order AT EFFECTIVE DATE OF TREMINATION
Flashed
Unitalshed - - -
Os hand
Products orred by Verminated enstrad or
Total covered by
purchase order
Previously shipped
and invoiced
Payment se be
To be mapieted
- - order
maired chrough
Indicated in this
proposal
(Partial verticipation
Nat to be empleted
I
only)
Ques
I
Ques
,
Que
.
PROPOSED SETTLEMENT
Um Coloma : and I only when proposal has
tean filed Class Extractions
No.
Items
Total prepared to date
Laste Hand
Total previously proposed
family or (detreas) by
the personal
a
6
e
(4)
8
1. Metals (from Form 2a)
2. Raw materials (other than metals) (from Form 2b).
3. Purchased parts (from Form 2b)
4. Finished componenta (from Form 2b) (See Seh. A).
5. Miscellaneous (from Form 200
6. Work in process (from Form 2e) (See Seb. A)
7. Dies, Jigs, distures and special toola (Form 2d)
a. Other costa (from Schedule B)
9. General and administrative expenses (from Sch. C)
10.
TOTAL (Items 1 to 9, inclusive)
11. Profit (explain la Schedule D)
12. Settlement expenses (from Schedule E)
13.
TOTAL (Itema 10 to 12 inclusive)
14. Settlements with subcontractors (from Schedule y)
15. Acceptable finiabed product (from Form 2b)
16. Allowance for Interest
17.
TOTAL (Itema 13 to 16, inclusive)
18. Disposal credita (from Schedule G)
19. Partial advance, or progress payments Class Seh. H)
20.
TOTAL CREDITS (Itema 18 and 19)
21.
Net SETTLEMENT (Item 17 less Item 20)
CERTIFICATE
The undersigned, individually and as an authorized representative of the contractor, certifies that be has esamined this Bettlement Proposal
and that, to the best of his knowledge and belief: (1) AS TO CONTRACTOR'S OWN CHARGES-The Proposed Settlement (exclusive of
charges net forth in Item 14) and supporting schedules and explanations have been prepared from the books of account and records of the com-
tractor in accordance with recognized commercial accounting practices; they include only those charges allocable to the terminated portion of
this contract; they have been prepared with knowledge that they will, or may, be used directly or indirectly all the basis of settlement of a claim or
claims against the United States or an agency thereof; and the charges as stated are fair and ressonable. (2) AS TO SUBCONTRACTORS'
CHARGES-(a) The contractor has examined, or caused to be examined, to an extent it considers adequate in the circumstances, the claima of
its immediate subcontractors (exclusive of claims filed against such immediate subcontractors by their subcontractors) (b) the settlements on
account of immediate subeontractors' own charges are fair and reasonable, said charges are allorable to the terminated portion of this contract and
said settlements were negotiated in good faith and are not more favorable to its immediate subcontractors than those which the contractor would
make if reimbursement by the Government were not Involved; (e) the contractor has received from all Due Immediate subcontractors appropriate
certificates with respect to their claims, which certificates, if the claims are for more than $1,000, are substantially in the form of this certificate;
and (d) the contractor has no knowledge leading it. to doubt (i) the reasonableness of the settlements with more remote subcontractors or (iii) that
the charges for them are allocable to this contract. Upon receipt by the contractor of amounts covering settlements with its immediate suboon-
tractors, the contractor will pay or eredit them promptly with the amounts 80 received, to the extent that it has not previously done so. The
term subcontractor as used above Includes suppliers.
TM undersigned certifies that la the best of his knowledge and belief the
etalementa with repairs. to accounting - made in the shove Certificate
an the
(Name of
By
(Supervisory amounting afficial)
(Authortand afficial)
(Tite)
I
(Date)
When the space provided for any Information la Insufficient, attach separate supporting schedules,
-756-
Regraded Unclassified
SCHEDULE À
ANALYSIS OF INVENTORY COST
(ITEMS 4 and €)
Furnish the following information (unless not reasonably available) in respoet of Inventories of finished componenta and work in process
insluded in this proposal:
Total Direct Later
Total Direct Mainetale
Total Indires Expense
TOTAL
Finished Componenta
Work is Process
SCHEDULE II
OTHER COSTS
(ITEM 8)
Item
Explanation
Amount
Leave Blank
SCHEDULE C
GENERAL AND ADMINISTRATIVE EXPENSES
(ITEM 9)
Detail of expenses
Method of allocation
Amount
Leave Blank
SCHEDULE D
PROFIT
(ITEM 11)
Explanation:
Amount
Leave Blank
SCHEDULE E
SETTLEMENT EXPENSES
(ITEM 12)
Item
Explanation
Amount
Leave Blank
SCHEDULE F
SETTLEMENTS WITH IMMEDIATE SUBCONTRACTORS AND SUPPLIERS
(ITEM 14)
Name and address of Subeontractor
Brief description of product canerled
Amount of
Leave Blank
Settlement
SCHEDULE G
DISPOSAL OR OTHER CREDITS
(ITEM 18)
Description
Amount
Leave Blank
(If practicship show apparately amount of disposal credita applicable se acceptable finished product included in Tiem 18)
SCHEDULE H
PARTIAL. ADVANCE OR PROGRESS PAYMENTS
(ITEM 19)
Date
Explanation
Amount
Leave Blank
When the space provided for any Information la Insufficient. attach separate supporting schedules.
-766-
Regraded Unclassified
APPENDIX - - EXHIBIT X11-C
260
- Aggreed.
Form la
1 ( I I
Oma - Contract Brown
SHORT FORM SETTLEMENT PROPOSAL
For Use by Prime Contractor or Subcontractor Under Terminated Pixed-Price War Supply Contract
TO BE USED ONLT WHERE YOU PROPOSE TO RETAIN OR DISPOSE OF ALL INVENTORY (ITEMS 1 AND 1) AND AMOUNT
OF YOUR NET PROPOSAL (ITEM 4) IS LESS THAN $1,000
This proposal applies to (check one):
A prime contract with the Government, or
Bubeontract or purchase order No(s)
with
(Mame of - - - Nation of Termination)
(Street address
(Address)
(Ciu)
(State)
Gevt. Agency
If moneys payable under the contract have been assigned, give name
Govt. Prime Contract No.
and address of assignee
Contractor's Reference No.
Effective date of termination
- of Centract - Order AT EFFECTIVE DATE OF TERMINATION
Finished
- - -
Ou hand
Productions - by - - -
Total arred by
I 1
Proviously abloged
I I .
and terretaed
Payment to be
Individual to -
To - employed
missived damage
(Partial
Not to be employed
I
1
i
Quan.
.
Ques.
.
-
.
PROPOSED
(Include mitr - allowible to - parties of -
1. Charge for acceptable finished product not covered by torrolding
1. Charge for work in process, raw materials, etc., on hand
s. Other charges, Including settlement expenses, settlements with auboontractors, de
4.
TOTAL CHARGES
& Delact-Your offer for entire Inventory included to Items 1 and 2 (Including proceeds of any sales)
6.
New SETTLEMENT
$
Give below & brief explanation of how you arrived at the amounts shown in items 2, 3, and 5. State the amount of profit and
the allowance for internet included in this proposal. State briefly the nature of the Inventory, how much of It was sold
and how much retained, and the mander in which sale prices and the value of Inventory retained were determined.
You should retain all papers and records relating to the proposal for possible examination by your customer or the contract-
Ing officer.
CERTIFICATE
The undersigned certifies that the above Proposed Settlement Includes only charges allocable to the terminated portion of
the entract or purchase order, that the total charges (Item 4) and the deduction for the inventory retained or disposed of
(Item 6) are fair and reasonable, and that this proposal has been prepared with knowledge that it will, or may, be used directly
= indirectly - the basis for settlement of a claim or claima against the United States or an agency thereof. Other charges
(Item 3) Include as allowance for interest on this claim to 60 days from the date hereof, and no additional interest will be
claimed unless 6 revised settlement proposal la submitted.
(Name of - -
By
(Signature)
(Deta)
(Title)
When the space provided for any information is insufficient, - reverse of this sheet or attach . separate schedule
- INSTRUCTIONS ON REVERSE SIZE)
-77b-
Regraded Unclassified
INSTRUCTIONS
1. This settlement proposal should be submitted to the contracting officer, if you are a prime con-
tractor, or to your customer, if you are a subcontractor.
2. You should review any provisions of your contract relating to termination. The Contract Set-
tlement Act of 1944 provides for the payment of fair compensation for termination of war contracts,
and regulations of Government contracting agencies contain detailed information relating to termina-
tion claims. Your claim for fair compensation may be prepared on a cost basis, or on the basis of a per-
centage of the contract price representing the estimated percentage of completion of work under the
terminated contract, or may be calculated by any other method that will provide fair compensation for
the preparations made and work done for the terminated portion of the contract, including a ressonable
profit on such preparations and work.
3. Generally, if your settlement proposal is prepared on a,cost basis. it may Include, under Items 2
and 3, the following:
(a) Costa-Costs incurred which are reasonably necessary and are properly allocable, to the
terminated portion of your contract under recognized commercial accounting practices, including
direct and indirect manufacturing, selling and distribution, administrative, and other costa and
expenses incurred.
(b) Settlements with Subcontractors-Reasonable settlements of claims of subcentractors
allocable to the terminated portion of your contract.
(c) Settlement Erpenses-Reasonable costa of preserving and protecting termination inven-
tory in your possession and of settling your claim.
(d) Profit.-A reasonable profit with respect to the preparations you have made and work you
have actually done for the terminated portion of your contract. No profit should be included with
respect to work which has not been done,
4. If you use this form, your net proposal must be less than $1,000, and you must retain or dispose
of all the termination inventory at the best price obtainable." The Government may examine your books
and records relative to this proposal, and if you are a subcontractor, your customer must be satiafied with
respect to it. Acceptance of this proposal will constitute approval of the price which you offer for the
entire inventory, including the proceeds of any enles which you have made.
5. Reference is made to Section 19 of the Contract Settlement Act of 1944 relating to the retention
of records and working papers, and to any similar provisions of your contract, and to the provisions of
Section 19 of the Act imposing penalties for the filing of fraudulent claima
-786-
Regraded Unclassified
APPENDIX 6 EXHIBIT X11-D
261
Pare A govered,
fReed fastrections for Use of Deadard Contract Settlement Proposal Formel
Form 1b
Bodget No. 17-Bank,
Demo OF Contract ENTLAMENT
SETTLEMENT PROPOSAL (TOTAL COST BASIS)
For Use by Prime Contractor or Subcontractor Under Terminated Fixed-Price War Supply Contract
This proposal applies to (elbeck one)
(Company)
A prime contract with the Government, or
Bubeontract or purchase order No. (a)
(Street address)
with
(Name of contractor - - Notion of Termination)
(Cay)
(State)
(Addres)
If moneys payable under the contract have been assigned, give name
Govt. Agency
and address of assignee
Govt. Prime Contract No.
Contractor's Reference No.
la Form 3 (Seledule of Accounting Information)
Effective date of termination
attached? If pat. explain
Yes
No
This is proposal No
under this termination and is deemed to be
interim, or
final. (Check one)
of Cuntract - Order AT EFFECTIVE DATE OF TERMINATION
Finished
Understed if - consed
On hand
Products covered by informated matract - purshase
Total and is
onler
Previously shipped
and invoired
Payment to -
Payment - to be
Submiquently
wind . unle
minimi through
suppleted and
Net to la
nomed Chresgo
invoiced
invoicing
in onling
completed
(tw sole below)
(a)
(h)
(#)
(d)
(4)
e
Quan
-
Quie
-
Quan
I
Nuts 'shimo ob mile - und the of - m - hirth new the Internal - represed below should be la date of completion of the antioned
persias of the and the deduction for Related product Chem IM believe shesid la the prim il Entabed product is volumes (a), (to. and (if) above.
PROPOSED SETTLEMENT
Use Columne and 1 white where previous proposal tax
Been Bled the Instructions)
No.
Dam
Total proposed to date
Lan Nesk
Total previously propond
Instrume - by
this proposal
(I)
-
⑉
DD
(I)
1. Direct material
2. Direct labor
3. Indirect factory expense (from Schedule A)
4. Dies, just, fixtures and special tools (Form 2d)
5. Other costs (from Schedule D)
6. General and administrative expenses (from Sch. C)
7.
TOTAL (Igema I to 6, Inclusive)
8. Profit (explain in Schedule D)
9.
TOTAL (Itema 7 and 8)
10. Deduct-Finished product Invoiced or to be
Invoiced (See note above)
11.
TOTAL (Item 9 loss Item 10)
12. Settlement expenses (from Schedule E)
13.
TOTAL (Items 11 and 12)
14. Settlements with subcentractors (from Sch. F).
15. Allowance for interest
16.
TOTAL (Items 13 to 15, inclusive)
17. Disposal credita (from Schedule G)
18. Partial, advance, or progress payment=(ivatich In
19.
TOTAL CREDITS (Itema 17 and 18)
20.
NET SETTLEMENT (Item 16 less Item 19)
None-Invening achedules Forma 3a. 29, 2m. and an applicable to allowable la visis qualified and ⑉ hand et date of - de Aird. - Instructions,
CERTIFICATE
The undersigned. individually and - an authorized representative of the contractor, certifies that be has examined this Settlement Proposal
and that, to the beet of his know leslage and helief: (1) AS TO CONTRACTOR'S OWN CHARGES-The Proposed Settlement (exclusive of
charges set. forth in Item 14) and supporting sciedules and explanations have been prepared from the books of account and records of the con-
tractur in accordance with recignized eummercial accounting practices; they include only the charges allocable la the tenumated cultract they
have been prepared with knowledge that they will. or DIRE, be used directly or indirectly or the basis of settlement of a claim of claims against the
United States or an agrocy thereof; and the charges as stated are fair and reasonable. (2). AS TO SURCOXTRACTORS CHARGES-
(a) The contractor has esamined, or caused to le examined, to an extent it eunsiders adequate in the circumstances, the claims of its immediate
subsontractors (escluive of claims filed against worh immediate subrostracture by their da the on account of
Immediate subcontractors' own charges are fair and maid charges are allocable to the terminated purtion of this culract and said settle-
mente were negotiated in good faith and are not mure favorable to its immediate subsontractors than the which the contractor would make If
reimbunement by the Government were nut Involved; (e) the contractor has received from all its immediate subsentrariors appropriate certifi-
enter with respect to Unit claims. which cortificates, if the claims an for hure than $1,000, are extrantially in the form of this certificate; and
(d) the contractor has nu knowledge leading it to doubt (i) the massabilienes of the antionments with more timute subsuntracture or (ii) that the
charges for them are alluestile to this contract. Upon receipt. by the contractor of amounts covering with its immediate subson-
tractors, the contractor will pay or eredit them promptly with the amounts au received, to the estent that is has nut previously done so. The
term subcontractor as used above includes suppliers.
The undersigned certifies that to the last of has knowledge and Delled the
elatements with required is accounting number made is the above Certificate
are Ins.
(Name of -
By
(Repervisory - -
(Authoried affirial)
(Tras
(THIN)
(Date)
When the space provided for any Information la Insufficient, attach separate supporting schedules.
-79b-
Regraded Unclassified
SCHEDULE A
INDIRECT FACTORY EXPENSE
(ITEM ao
Detail of expenses
Method of Allocation
Amount
Leave Blank
SCHEDULE .
OTHER COSTS
(ITEM 4)
lum
Explanation
Amount
Leave Blank
SCHEDULE C
GENERAL AND ADMINISTRATIVE EXPENSES
(ITEM 4)
Detail of expenses
Method of Alloeation
Amount
Leave Blank
SCHEDULE D
PROFIT
(ITEM B)
Explanation:
Amount
Leave Blank
SCHEDULE E
SETTLEMENT EXPENSES
(ITEM 12)
Item
Explanation
Amount
Leave Blank
SCHEDULE ,
SETTLEMENTS WITH IMMEDIATE SUBCONTRACTORS AND SUPPLIERS
(ITEM 14)
Amount of
Name and address of Subcontractor
Brief description of product canceled
Leave Blank
Bettlement
SCHEDULE G
DISPOSAL OR OTHER CREDITS
(ITEM 17)
Description
Amount
Leave Blank
or des experiency - of disponsi credito applicable le acceptable Rivished product reported de Form me
SCHEDULE H
PARTIAL ADVANCE OR PROGRESS PAYMENTS
(ITEM 18)
Date
Explanation
Amount
Leave Blank
When the space provided for any Information la attach separate supporting schedules.
-Bub-
Regraded Unclassified
Form Approved
Budget Bureau No. 17-R004.
TERMINATION INVENTORY SCHEDULE-METALS (In Mill Product Form)
Form 2a
Orrea or CONTRACT BETTLEMENT
(Use Form 2b for castings and forgings)
This schedule applies to (check one):
Property Classification
A prime contract with the govt., or
Subcontract(s) or purchase order(s)
(See Instructions)
{
with
(Nuse of - via - Mation of
(Cressay)
(Addres)
Best address
for
(Product by perminated medical -
(Can
Date
Govt. Prime Contract No.
Contractor's Ref. No.
Location of material
Form, Shape, Roll-
Speelfications, and
Dimensions
COST
ing treatment.
Heat treatment,
Where applicable,
Temper, Hardness,
Alloy or other Variable
Finish, etc.
Designation in the
Thickness
Width
Length
Leave
type of edge
Specification
Item No.
FL
In.
(a) Condition (Use Code.
See Instructions)
Unit
of
Scrap
Blank
recommended
Contractor's
offer (C),
Quantity
or Proceeds of
Lasve
(Example:
G. a la jule
meas-
(Reample: Ha wirls.
Unit
Total
authorised
Blank
(Example: Annesled
00-T-951-D
Wall for twing.
I a I
ure
truining - CR May - in eige. resided has - -
and pickled, y hand,
- for
- for -
sale (A)*
I !
pollsbed, etc.)
B10-42 Alloy 7,
tre for support
putra da No.
valid take
la estruded
Grade B)
-
(1)
(2a)
(2b)
(%)
(24)
(2e)
(20)
(4)
(4a)
(5)
(
(7)
(8)
-81b-
APPENDIX 1-11 EXHIBIT B I
*Use col. 8 for contractor's offer and for proceeds of an authorised sale. Indicate former by "C"
NOTE.-See Instructions, par. 25, concerning certificate.
and latter by "A" after dollar amount. Show quantity (on a second line) If less than col. 4.
Page
of
pages
See Instructions, par. 26, concerning Govt. owned property.
as GOVERNMENT PRINTING OFFICE 10-41213-1
262
Regraded Unclassified
Form Approved.
Bodget Bureau No. 17-R.006.
TERMINATION INVENTORY SCHEDULE
Form 2b
OFFICE or CONTRACT SETTLEMENT
RAW MATERIALS
PURCHASED PARTS
FINISHED COMPONENTS
FINISHED PRODUCT
MISCELLANEOUS
(Other Than Metals)
This schedule applies to (check one):
Property Classification
A prime contract with the govt., or
Subeontract(s) or purchase order(s)
(See Instructions)
with
(Name of - - Notice of Termination)
(Company)
(Address)
(Street address
for
- by terminated - or ender)
Govt. Prime Contract No.
Contractor's Ref. No.
Location of material
DESCRIPTION
COST
8 Item No.
If property has commercial value, furnish full commercial description (see Instructions). Otherwise,
Centribe Des
J
(For finished product, show con-
Contractor's
Leave
furnish description sufficient to enable contracting officer to determine appropriate disposition thereof.
Unit of
Blank
I
Quantity
tract price Instead of cost)
I -
offer (C), or
Proceeds of
Leave
Where practicable, show manufacturer's name, address, and
measure
entalog No. Where cola. 2a and 2b are not applicable, write
Govt. part or Drawing
How packed
authorized
Blank
across dotted lines.
No. and Nev. No.
code Mila, -
Unit
Total
sale (A)*
(2)
(2a)
(2b)
(3)
(4)
(4m)
(5)
(6)
(7)
(8)
82b
APPENDIX B EXHIBIT X11-F
- Use col. 8 for contractor's offer and for proceeds of an authorized sale. Indicate former by
NOTE.-See Instructions, par. 25, concerning certificate.
"C" and latter by "A" after dollar amount. Show quantity (on a second line) If less than col. 4.
Page
of
pages.
See Instructions, par. 26, concerning Govt. owned property.
Regraded Unclassified
Form Approved.
Budget Bureau No. 17-R006.
TERMINATION INVENTORY SCHEDULE-WORK IN PROCESS
Form 2c
Office or CONTRACT SETTLEMENT
This schedule applies to (check one):
A prime contract with the govt, or
Subcontract(s) or purchase order(s)
with
(Name of Contrator who - Nation of Termination)
(Company)
(Addred
(Rives address
for
(Product covered by terminated - - and
Club
(Stend
Govt. Prime Contract No.
Contractor's Ref. No.
Location of material
DESCRIPTION
COST
Unit
(Information in Col. 5 need not
Contractor's
a Item No.
If property has commercial value, furnish full commercial descrip-
Estimated
of
be given If not reasonably
offer (C),
Leave
Leave
Mess-
tion. Otherwise furnish description sufficient to gnable contracting
Weight
Quantity
available
or Proceeds of
Blank
Blank
officer to determine appropriate disposition thereof.
ure
authorized
Unit
Total
sale (A)*
(2)
(2a)
(4)
(la)
(5)
(6)
(7)
(8)
-83b-
APPENDIX XII-6 EXHIBIT 8 I
*Use col. for contractor's offer and for proceeds of an authorised asie. Indicate former by "0"
NOTE.-See Instructions, par. 25, concerning certificate.
and Inster by "A" after dollar amount. Show quantity (on a second line) If less than col 4.
Page
of
pages,
See Instructions, par. 26, concerning Govt. owned property.
263
Regraded Unclassified
Form Approved
Budget Bureau No. 17-ROO7.
TERMINATION INVENTORY SCHEDULE
Form 2d
(Dies, Jigs, Fixtures, etc., and Special Tools)
Office or CONTRACT SETTLEMENT
This schedule applies to (check one):
Property Classification
A prime contract with the govt., or
Subcontract(s) or purchase order(s)
(See Instructions)
with
(Name of - who - Nation - Termination)
(Addres)
for
chres address)
(Protest - be terminated - - was
Govt. Prime Contract No.
(City)
-
Contractor's Ref. No.
Location of material
DESCRIPTION
Leave
8 Item No.
I #
I
Cost
Cost APPLICABLE TO Tma CONTRACT
Contractor's
If property has commercial value, furnish full commercial description. Otherwise
Blank
I
offer (C), or
furnish description sufficient to enable contracting officer to determine appropriate
Leave
disposition thereof,
Code.
Quantity
To entire
To portion not to
proceeds of
Unit
Total
contract
authorized
Blank
Where practicable, show manufacturer's name, address, and catalog No.
be completed
sale (A)*
(2)
(3)
(4)
(5)
(6)
(Ba)
(6b)
(7)
(8)
84b
H-11X LIBINX3 8 XION3ddV
. Use egl. 8 for contractor's offer and for proceeds of an authorized sale. Indicate former by "C"
NOTE.-See Instructions, par. 25, concerning certificate.
and latter by "A" after dollar amount. Show quantity (on a second line) If less than col. 4.
page
of
pages.
See Instructions, par. 26, concerning Govt. owned property.
Regraded Unclassified
APPENDIX B EXHIBIT XII - 1
-264
Form approved.
Busiget Bureau No. 17-D.00R.
SCHEDULE OF ACCOUNTING INFORMATION
Form 3
Ovings OF CONTRACT SETTLEMENT
This proposal applies to (check one):
A prime contract with the Government, or
(Ompany)
Subcontract or purchase order
(Street address)
(City)
(State)
with
Government Agency
Govt. Prime Contract No.
Contractor's Reference No.
(Name and address of contractor who sent Notice of Termination)
Effective date of termination
1. Furnish name, title, address, and telephone number of an individual in your organization
from whom additional information may be requested on questions relating to (1) accounting matters;
(2) property disposal:
(1)
(2)
2. Are the accounts of the contractor subject to regular periodic examination by independent
public accountants? Yes
No
3. Furnish the name and address of any accountants who have reviewed or assisted in the prepars-
tion of the attached proposal.
4. Furnish the name and address of any governmental agency which has reviewed your accounts in
connection with a prior settlement proposal.
5. Have there been any significant deviations from your regular accounting procedures and policies
in arriving at the costs set forth in the attached proposal? Yes
No
If YES, explain briefly.
6. Were the detailed cost records used in preparing this proposal controlled by and in agreement"
with your general books of account? Yes
No
7. Were inventory quantities based on a physical count as of the date of termination? Yes
No
If NO, explain exceptions.
8. If this settlement proposal is based on standard costs and such costs are in excess of actual, has
proper adjustment thereof for any significant variations been made? Yes
No
If NO, explain
9. Does this proposal include charges for major inventory items and claims of subcontractors BOTH
mon to this terminated contract and other work of the contractor? Yes
No
If YES, furnish intor-
mation as to the method used in allocating amounts to the terminated portion of this contract.
10. Explain briefly your method of pricing inventories, indicating whether material handling cost
has been included in charges for materials.
11. Are any parts, materials, or finished product, known to be defective, included in the inventorias =
Yes
No
If YES, explain.
12. Have any charges been included in this proposal in respect of severance, dismissal, or separation
pay? Yes
No
If YES, furnish brief explanation and estimates of amounts included.
13. Does this proposal include any element of profit to the contractor or a related organization, other
than profit set forth separately in the proposal or included in the contract price at which acceptable
finished product, if any, is included in the proposal? Yes
No
If YES, explain briefly.
14. Describe briefly the nature of indirect expense items included in inventory costs (see Schedule
A, Form 1) : and explain your method of allocation used in preparing this proposal, including if practi-
cable, the rates used and the period of time upon which they are based.
15. Do the costs set forth in the attached proposal include provisions for any reserves other than
normal depreciation reserves? Yes
No
If YES, list such reserves.
CERTIFICATE
I hereby certify that, to the best of my knowledge and belief, the above statements are true and
correct.
(Contractor)
(Supervisory accounting official)
(Title)
(Date)
Use reverse aide or attach schedule for required information
-85b-
Regraded Unclassified
APPENDIX 8 - EXHIBIT VIII-A
265
FORM OCS-RI
OFFICE OF CONTRACT SETTLEMENT
BUDGET BUREAU NO. 17-2011
19-15-441
APPROVAL EXPIRES SEPTEMBER 30, 1945
REPORTING DEPARTMENT
MONTHLY SUMMARY REPORT ON
TECHNICAL SERVICE
CONTRACT TERMINATIONS AND SETTLEMENTS
(PRIME CONTRACTS ONLY)
DATE TRANSMITTED
CORRECTIONS
CUMULATIVE
PREVIOUS
THROUGH OR
FOR MONTH OF
ITEM
REPORT
(Status -- of)
MONTH
MONTH
NORTH
(1)
(2)
131
(4)
1. FIXED PRICE CONTRACT TERMINATIONS
A. NUMBER
1. TERMINATIONS EFFECTED
2. CLAIMS FILED
3. TERMINATIONS "AWAITING CLAIM"
XXXXXXX
4. SETTLEMENTS "WITHOUT CLAIM
*******
3. SETTLEMENTS "WITH CLAIM"
6. CLAIMS AWAITING SETTLEMENT
*******
(REPORT IN THOUSANDS OF DOLLARS)
B. CONTRACT PRICE OF ITEMS CANCELED
1. TERMINATIONS EFFECTED
2. CLAIMS FILED
3. TERMINATIONS "AWAITING CLAIM"
XXXXXXX
4. SETTLEMENTS "WITHOUT CLAIM
xxxxxxx
3. SETTLEMENTS "WITH CLAIM
6. CLAIMS AWAITING SETTLEMENT
xxxxxxx
c. AMOUNT OF CLAIM
1. CLAIMS FILED
2. CLAIMS SETTLED
3. CLAIMS AWAITING SETTLEMENT
xxxxxxx
D. AMOUNT OF SETTLEMENT
1. GROSS SETTLEMENT
2. DISPOSAL CREDITS
3. NET SETTLEMENT
4. COST OF PROPERTY ACQUIRED IN SETTLEMENT
11. COST-PLUS-A-FEE CONTRACT TERMINATIONS
A. NUMBER
1. TERMINATIONS EFFECTED
2. TERMINATIONS SETTLED
3. TERMINATIONS AWAITING SETTLEMENT
*******
(REPORT IN THOUSANDS OF DOLLARS)
B. ESTIMATED COST OF ITEMS CANCELED
1. TERMINATIONS EFFECTED
2. TERMINATIONS SETTLED
3. TERMINATIONS AWAITING SETTLEMENT
xxxxxxx
1This column should contain the corrections (plus or minus) to the previous month's cusulative total so that where
the figures in Column (4) for this report are added to the corrected cumulative total in the previous report the
sume will agree with the figures in Column (3).
REPORTING OFFICIAL
SIGNATURE
-87b-
Regraded Unclassified
FORM OCS-R2
BUDGET BUREAU NO. 17-2013
(9-15-44)
OFFICE OF CONTRACT SETTLEMENT
APPROVAL EXPIRES SEPTEMBER 30, 1945
REPORTING DEPARTMENT
TIME LAPSE REPORT OF TERMINATION CLAIMS SETTLED
TECHNICAL SERVICE
(FIXED PRICE PRIME CONTRACTS)
DATE TRANSMITTED
(REPORT IN THOUSANDS OF DOLLARS)
NUMBER
CONTRACT PRICE OF
ITEMS CANCELED
AMOUNT CLAIMED
AMOUNT SETTLED FOR
ITEMS BY TIME INTERVALS
CUMULATED
FOR
CUMULATED
FOR
CUMULATED
FOR
CUMULATED
FOR
THROUGH
MONTH OF
THROUGH
MONTH OF
THROUGH
MONTH OF
THROUGH
MONTH OF
MONTH
MORTH
MONTH
NORTH
MONTH
MONTH
MONTH
MONTH
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
TERMINATION CLAIMS SETTLED TOTAL
ELAPSED TIME FROM EFFECTIVE DATE OF
TERMINATION
3 MONTHS OR UNDER
4 THROUGH 6 MONTHS
7 THROUGH 12 MONTHS
OVER 12 MONTHS
-88b-
ELAPSED TIME FROM DATE OF CLAIM
3 MONTHS or UNDER
% THROUGH 6 NOMTHS
7 THROUGH 12 MONTHS
OVER 12 MONTHS
CORRECTIONS TO PREVIOUS REPORT'S
- E-IIIA LISIHXS - 8
TERMINATION CLAIMS SETTLED TOTAL
XXXX
xxxx
XXXX
XXXX
ELAPSED TIME FROM EFFECTIVE DATE OF
TERMINATION
3 MONTHS OR UNDER
XXXX
XXXX
****
xxxx
4 THROUGH 6 MONTHS
XXXX
****
XXXX
XXXX
7 THROUGH 12 MONTHS
XXXX
XXXX
XXXX
XXXX
OVER 12 MONTHS
XXXX
XXXX
****
XXXX
ELAPSED TIME FROM DATE OF CLAIM
3 MONTHS OR UNDER
XXXX
XXXX
XXXX
XXXX
4 THROUGH 6 NONTHS
XXXX
xxxx
XXXX
XXXX
7 THROUGH 12 MONTHS
XXXX
XXXX
XXXX
****
OVER 12 MONTHS
****
XXXX
xxxx
xxxx
These columns should contain the corrections (plus or minus) to the previous month's cumulative totals se that when the appropriate figures
in Columns (3). (5). (7) and (9) for this report are added to the corrected cusulative totals la the previous report the - will agree
with the figures In Columns (2), (4), (4) and (8).
REPORTING OFFICIAL
SIGNATURE
Regraded Unclassified
FORM OCS-R3
BUDGET BUREAU NO. 17-2013
(9-15-44)
OFFICE OF CONTRACT SETTLEMENT
APPROVAL EXPIRES SEPTEMBER 30, 1945
TIME LAPSE REPORT FOR TERMINATION CLAIMS
REPORTING DEPARTMENT
AWAITING SETTLEMENT AND TERMINATIONS AWAITING CLAIMS
TECHNICAL SERVICE
(FIXED PRICE PRIME CONTRACTS)
STATUS AS OF
DATE TRANSMITTED
PARTIAL PAYMENTS
NUMBER OF
CONTRACT PRICE OF
ITEMS BY TIME INTERVALS
CLAIMS OR
ITEMS CANCELED
AMOUNT CLAIMED
TERMINATIONS
(Thousands)
(Thousands)
AMOUNT
NUMBER
(Thousands)
(1)
(2)
(3)
(4)
151
(6)
TERMINATION CLAIMS AMAITING SETTLEMENT - TOTAL
ELAPSED TIME FROM EFFECTIVE DATE OF TERMINATION
3 MONTHS OR UNDER
4 THROUGH 6 MONTHS
7 THROUGH 12 MONTHS
OVER 12 MONTHS
-968-
ELAPSED TIME FROM DATE OF CLAIM
3 MONTHS OR UNDER
4 THROUGH 6 MONTHS
APPENDIX B - EXHIBIT VIII-C
7 THROUGH 12 MONTHS
OVER 12 MONTHS
TERMINATIONS AMAITTING CLAIMS - TOTAL
ELAPSED TIME FROM DATE OF TERMINATION
3 MONTHS OR UNDER
4 THROUGH 6 MONTHS
1 THROUGH 12 MONTHS
OVER 12 MONTHS
266
REPORTING OFFICIAL
SIGNATURE
Regraded Unclassified
267
APPENDIX C
STATISTICAL TABLES
Table
Page
CONTRACTING AGENCY REPORTS
1. TOTAL, ALL REPORTING AGENCIES - War Contract Termi-
nations and Settlements, Prime Contracts, Quarter
Ending September 30, 1944.
2. WAR DEPARTMENT - War Contract Terminations and
Settlements, Prime Contracts, Quarter Ending
September 30, 1944.
3. NAVY DEPARTMENT - War Contract Terminations and
Settlements, Prime Contracts, Quarter Ending
September 30, 1944.
4. MARITIME COMMISSION - War Contract Terminations and
Settlements, Prime Contracts, Quarter Ending
September 30, 1944.
5. PROCUREMENT DIVISION - TREASURY DEPARTMENT - War Con-
tract Terminations and Settlements, Prime Contracts,
Quarter Ending September 30, 1944.
6. DEFENSE PLANT CORPORATION - RECONSTRUCTION FINANCE
CORPORATION - War Contract Terminations and Settle-
ments, Prime Contracts, Quarter Ending September 30,
1944.
WAR PRODUCTION BOARD TABULATIONS
7. NUMBER AND PERCENTAGE DISTRIBUTIONS FOR PRIME WAR CON-
TRACT TERMINATIONS, By Geographic Region and Major
Object, January - July 1944.
8. CONTRACT PRICE OF ITEMS CANCELED AND PERCENTAGE DISTRI-
BUTIONS FOR PRIME WAR CONTRACT TERMINATIONS, By Geo-
graphic Region and Major Object, January - July 1944.
9. PERCENTAGE DISTRIBUTION OF AMOUNT OF WAR SUPPLY CONTRACTS,
By Geographic Region and Status, Thru July 1944.
10. NUMBER, AMOUNT OF CLAIM, AND PERCENTAGE DISTRIBUTIONS
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATION CLAIMS
SETTLED, by Size of Claim and Lapse of Time from Effective
Date of Termination, January - July 1944.
CI
Regraded Unclassified
- 2 -
Table
Page
11.
NUMBER, AMOUNT OF CIAIM, AND PERCENTAGE DISTRIBUTIONS
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATION CLAIMS
PENDING, by Size of Claim and Lapse of Time from Effec-
tive Date of Termination, January - July 1944.
12.
NUMBER, AMOUNT OF CLAIM, AND PERCENTAGE DISTRIBUTIONS
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATIONS FILED,
by the Size of Claim and Lapse of Time from Effective
Date of Termination to Filing Date of Claim, January -
July 1944.
13.
NUMBER, AMOUNT OF CIAIM, AND PERCENTAGE DISTRIBUTIONS
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATION CLAIMS
SETTLED, and Lapse of Time from Filing Date to Settle-
ment Date, January - July 1944.
14.
NUMBER OF PRIME FIXED-PRICE WAR CONTRACT TERMINATIONS
CLAIMS SETTLED, by Size of Claim, Number of Subcontractors'
Claims Submitted, and Lapse of Time from Effective Date to
Settlement Date, January - July 1944.
15.
NUMBER AND PERCENT OF SETTLED PRIME CONTRACTOR CLAIMS
REQUIRING 6 MONTHS OR MORE FOR SETTLEMENT, By Size of
Claims and by Number of Subcontractors' Claims, January -
July 1944.
16.
SUBCONTRACTOR'S SETTLEMENTS AS RELATED TO PRIME CON-
TRACTOR'S SETTLEMENTS, by Size of Claim, January - July
1944.
17.
NUMBER AND PERCENTAGE DISTRIBUTIONS OF COMPANIES HAVING
PRIME CONTRACT TERMINATIONS, by Number of Terminations
per Company and Total Contract Price of Items Canceled
per Company, January - July 1944.
CII
Regraded Unclassified
268
CONTRACTING AGENCY REPORTS
Tables 2 through 6 give the information on contract termi-
nations and settlements as reported to the Office of Contract Settle-
ment on Form OCS-R1 (Appendix B, Exhibit XIII) by the War Department,
Navy Department, Maritime Commission, Treasury Department (Procure-
ment Division), and Reconstruction Finance Corporation, (Defense Plant
Corporation). Table 1 is a summary for the five reporting contracting
agencies.
lc
Regraded Unclassified
269
TABLE 1
APPENDIX c
TOTAL-ALL REPORTING AGENCIES
WAR CONTRACT PERMINATIONS AND SETTLEMENTS - PRIME CONTRACTS
Quarter Ending September 30, 1944
CUMULATIVE
FOR MONTH OF:
CUMULATIVE
ITEM
THROUGH
THROUGH
JUNE 30, 1944
JULY
AUGUST
SEPTEMBER
SEPT. 0, 1944
ALL CONTRACTS
Number
(Number)
Terminations Effected
104,293
1,785
4,366
5,739
Terminations Bettled
116,183
94,6%6
2,316
4,318
4,765
106,036
Terminations Avaiting Settlement d/
9,657
9,126
9,174
10,147
10,147
Contract Price of Items Canceled
(Thousands of Dollars)
Terminations Effected
17,950,272
756,94
1,288,637
1,954,698
Terminations Settled
21,950,549
6,64 ,963
1,282,642
665,007
959,901
9,530,545
Termina lone Avaiting Settlement 11,307,309
10,781,609
11,405,209
12,420,006
12,420,006
FIXED-PRICE CONTRACTS
Number
(Number)
Terminations Effected
105,776
1,757
4,330
5,700
Claims Filed
115,565
11,345
641
712
762
19,460
Deminations Awaiting Claim
6,794
6,443
6,689
7,671
7,671
Settlements Without Claim
85,637
1,467
3,372
3,955
94,432
Settlementa With Claim
8,799
811
918
776
11,04
Claims Avaiting Settlement d/
2,546
2,376
2,170
2,156
2,156
Price of Itoms Canceled
(Thousands
of Dollars)
Terminations Effected
13,645,45
433,169
803,488
923,026
15,805,028
Claims Filed
5,163,757
482,900
168,941
1,184,550
7,100,198
Perminations Awaiting Claim
5,162,062
4,856,401
5,131,970
4,684,693
4,684,693
Nettlementa Without Claim
3,319,526
255,950
258,978
185,773
4,020,207
With Claim
2,861,905
960,981
395,370
50,165
4,721,421
Claims Avaiting Stilement d/
2,501,852
1,823,771
1,697,342
2,378,707
2,378,707
Amount of Claim
Claims Filed
460,705
36,012
51,346
49,162
59,225
Claima Settled
264,704
73,568
50,115
32,775
420,961
Claims Awaiting Settlement
196,001
158,645
159,878
172,264
17:,264
Assour of Settlement
Gross Settlement
211,474
66,676
42,838
28,967
549,955
Disposal Credits
20,746
11,047
6,117
3,011
43,921
Net Settlement
187,728
55,629
36,721
25,956
306,034
Coat of Property Acquired in
Settlement
46,308
13,920
15,584
11,540
87,352
COST-PLUS-A-FEK CONTRACTS
Number
(Number)
Terminations Effected
517
28
36
39
620
Terminations Settled
200
38
28
34
300
Terminations Avaiting Settlement
317
307
515
320
320
Retimated Cost of Items Canceled
(Thousands of Dollars)
Terminations Effected
4,304,927
323,773
485,149
1,031,672
6,145,521
Terminations Settled
461,532
65,731
10,689
250,963
788,915
Terminations Awaiting Settlement 3,843,395
4,101,437
4,575,897
5,556,606
5,356,606
Summarized from reports of the contracting agencies to the Office of Contract Settlement.
b
Includes data cumulative through July 31, 1944 for the Reconstruction Finance Corporation - Defense
Plant Corporation, for which earlier data are unavailable.
Does not include data for month of July for Reconstruction Finance Corporation - Defense Plant Corpora-
tion for all lines except those footnoted (d) which are "Status ne of the end of Month" lines.
d
Data entered in these lines are "Status na of the end of Month".
30
Regraded Unclassified
TABLE 2
APPENDIX e
WAR DEPARTMENT
WAR CONTRACT TERMINATIONS AND SETTLEMENTS . PRIME CONTRACTS
Quarter Ending September 30, 1944 &
CUMULATIVE
FOR MONTH OF:
CUMULATIVE
ITEM
THROUGH
THROUGH
JUNE 30, 1944
JULY
AUGUST
SEPTEMBER
SKPT. 30, 1944
ALL CONTRACTS
Number
(Number)
Terminations Effected
26,101
1,089
1,031
1,567
29,788
Terminations Settled
20,824
1,765
1,681
1,442
25,713
Terminations Awaiting Settlement b
5,277
4,601
3,951
4,075
4,075
Contract Price of Items Cancelled
(Thousands of Dollare)
Terminations Effected
14,046,684
393,512
964,575
1,544,279
16,949,050
Terminations Settled
6,047,820
1,252,639
563,664
714,758
8,578,881
Terminations Awaiting Settlement b
7,998,864
7,139,737
7,540,648
8,370,169
8,370,169
FIXED-PRICE CONTRACTS
Number
(Number)
Terminations Effected
25,717
1,072
1,001
1,544
29,334
Claims Filed
6,671
592
523
644
8,450
Terminations Awaiting Claim
3,956
3,469
3,023
3,067
3,067
Settlements Without Claim
15,090
967
924
835
17,817
Settlements With Claim
5,568
760
735
580
7,643
Claims Awaiting Settlement b.
1,103
935
723
807
807
Contract Price of Items Cancelled
(Thousands of Dollars)
Terminations Effected
10,893,851
175,617
519,290
622,276
12,211,034
Claims Filed
4,557,304
289,674
234,027
1,139,845
6,220,850
Terminations Awaiting Claims b
3,528,638
3,180,595
3,258,265
2,631,588
2,631,588
Settlements Without Claim
2,807,909
233,986
207,593
109,108
3,358,596
Settlements With Claim
2,781,824
952,922
345,887
355,051
4,435,684
Claims Awaiting Settlement b
1,775,480
1,112,232
1,000,372
1,785,166
1,785,166
Amount of Claim
Claims Filed
406,549
30,856
45,947
41,496
524,848
Claims Settled
252,826
72,686
46,488
24,188
396,188
Claims Awaiting Settlement b
153,723
111,893
111,352
128,660
128,660
Amount of Settlement
Gross Settlement
203,055
66,008
39,866
21,180
330,109
Disposal Credita
23,029
10,946
5,998
2,652
42,625
Not Settlement
180,026
55,062
33,868
18,528
287,484
Cost of Property Acquired in
Settlement
45,072
13,653
14,459
7,417
80,601
COST-PLUS-A-FEE CONTRACTS
Number
(Number)
Terminations Effected
384
17
30
23
454
Terminations Bettled
166
38
22
27
253
Torminations Awaiting Settlement b
218
197
205
201
201
Retimated Cost of Items Cancelled
(Thousands of Dollars)
Terminations Effected
3,152,833
217,895
445,285
922,003
4,738,016
Terminations Settled
458,087
65,731
10,184
250,599
784,601
Terminations Avaiting Settlement 2,694,746
2,846,910
3,282,011
3,953,415
3,953,415
As reported by the War Department to the Office of Contract Settlement.
b
Data entered in those lines are "Status as of the end of Month"-
4c
Regraded Unclassified
270
TABLE ,
APPENDIX C
NAVY DEPARTMENT
WAR CONTRACT TERMINATIONS AND SETTLEMENTS-FRUME CONTRACTS
Quarter knding September 30, 1944
CUMULATIVE
FOR MONTH OF:
CUMULATIVE
THROUGH
ITEM
THROUGH
JUNE 30, 1944
JULY
AUGUST
SEPTEMBER
SEPT. 30, 1944
ALL CONTRACTS
Number
(Number)
Termination Effected
1,962
454
460
Terminations Settled b
773
787
3,629
225
300
383
Terminations Awaiting Settlement
1,695
1,175
1,384
1,544
1,934 di
1,934
Contract Price of Itema Canceled
Terminations Effected
(Thousands of Dollars)
3,012,710
858,484
277,678
Terminations Bettled
371,586
4,020,458
207,918
25,809
58,154
186,996
478,877
Terminations Awaiting Settlement£/
2,804,792
3,157,467
3,356,991
3,541,581
3,541,581
FIXED-PRICE CONTRACTS
Number
(Number)
Terminations Effected
1,891
423
454
Claims Filed
758
380
3,526
50
61
34
525
Terminations Awaiting Claim
815
989
1,128
1,510
1,510
Settlements Without Claim
696
199
254
Settlements With Claim
342
1,491
91
26
46
41
Claims Awaiting Settlement
204
289
313
328
321
321
Contract Price of Items Canceled
(Thousands of Dollars)
Terminations Effected
2,135,886
252,606
237,814
Claims Filed
262,005
2,888,311
424,145
120,896
18,023
34,908
597,972
Terminations Awaiting Claim
1,524,810
1,635,890
1,827,089
2,001,221
2,001,221
Settlements Without Claim
186,951
20,630
28,592
Settlements With Claim
52,965
289,118
20,987
5,179
29,562
Claims Awaiting Settlement
134,031
403,158
189,759
518,875
507,336
408,213
408,213
Amount of Claim
Claims Filed
33,089
4,955
2,779
Claims Settled
1,845
42,668
3,972
560
1,960
6,460
12,952
Claims Awaiting Settlement
29,117
33,512
34,331
29,716
29,716
Amount of Settlement
Gross Settlement
3,094
573
Disposal Credita
1,619
5,921
84
11,207
97
21
Net Settlement
223
425
3,010
476
1,598
Cost of Property Acquired in
5,698
10,782
1,055
246
Settlement
1,125
4,123
6,549
COST-PLUS-A-FEE CONTRACTS
(Number)
Number
Terminations Effected
71
11
6
Terminations Settled
15
103
NA
NA
NA
NA
NA
Terminations Awaiting Settlement
71
Be
88
103
103
Estimated Cost of Items Canceled
(Thousands of Dollars)
Terminations Effected
876,824
105,878
Terminations Settled
39,864
109,581
1,132,147
.
-
-
-
Terminations Awaiting Settlement 876,824
-
982,702
1,022,566
1,132,147
1,132,147
As reported by the Navy Department to the Office of Contract Settlement.
A
In the absence of settlement information, it has been assumed that all cost-plus-a-fee contract
terminations reported by the Navy Department are awaiting settlement. This may understate some-
what the total mettled terminations and overatate those awaiting settlement.
Data entered in these lines are "Status B.O of the end of Month".
Preliminary.
50
Regraded Unclassified
TABLE 4
APPENDIX C
MARITIME COMMISSION
WAR CONTRACT TERMINATIONS AND SETTLEMENTS-PRIME CONTRACTS
Quarter Ending September 30, 1944
CUMULATIVE
FOR MONTH OF:
CUMULATIVE
ITEM
THROUGH
THROUGH
JUNE 30, 1944
JULY
AUGUST
SEPTEMBER
SEFT. 30, 1944
ALL CONTRACTS
Number
Terminations Effected
(Number)
2,390
189
655
643
Terminations Settled
3,877
361
253
105
31
750
Terminations Awaiting Settlament b
2,029
1,965
2,515
3,127
3,127
Contract Price of Items Canceled
(Thousands of Dollars)
Terminations Effected
401,203
332
7,167
3,239
Terminations Settled
411,941
17,689
-622
5,346
2,485
24,898
Terminations Avaiting Settlement
383,514
384,468
386,289
387,043
387,043
FIXED-PRICE CONTRACTS
Number
(Number)
Terminations Effected
2,383
189
655
643
Claims Filed
3,870
282
-4
52
9
339
Terminations Awaiting Claim b/
1,807
1,771
2,299
2,913
2,913
Settlements Without Claim
294
229
75
20
618
Settlements With Claim
67
24
30
11
132
Claims Awaiting Settlement
215
187
209
207
207
Contract Price of Items Canceled
(Thousands of Dollars)
Terminations Effected
130,524
332
7,167
3,239
141,262
Claims Filed
16,921
71,974
1,379
315
90,589
Terminations Awaiting Claim
99,197
30,795
34,963
37,400
37,400
Settlements Without Claim
14,406
-3,240
1,620
487
13,273
Settlements With Claim
3,283
2,618
3,726
1,998
11,625
Claims Awaiting Settlement
13,638
82,994
80,647
78,964
78,964
Amount of Claim
Claims Filed
5,270
197
486
-80
5,873
Claims Settled
590
81
679
314
1,664
Claims Awaiting Settlement
4,680
4,796
4,603
4,209
4,209
Amount of Settlement
Gross Settlement
501
72
666
291
1,530
Disposal Credita
35
la
31
46
116
Net Settlement
466
68
635
245
1,414
Cost of Property Acquired in Settlement
NA
NA
NA
NA
NA
COST-PLUS-A-FEE CONTRACTS
Number
(Number)
Terminations Effected
7
-
-
-
7
Terminations Settled
-
-
-
-
-
Terminations Awaiting Settlement
7
7
7
7
7
Estimated Cost of Items Canceled
(Thousands of Dollars)
Terminations Effected
270,679
-
-
-
270,679
Terminations Bettled
-
.
-
.
-
Terminations Awaiting Settlement
270,6799
270,679
270,679
270,679
270,679
8
Aa reported by the Maritime Commission to the Office of Contract Settlement.
Data entered in these linee are "Status as of the end of Month".
These negative figures for monthly additions to data for "Settlements Without Claim" in July and
"Claims Filed" in September are the result of reinstatements 08 "pending" in these months of termina-
tions previously reported as settled. The actual monthly additions to these amounts are thus not
correctly reflected by these figures noted.
Data not available.
60
Regraded Unclassified
271
TABLE ,
APPENDIX C
PROCUREMENT DIVISION - TREASURY DEPARTMENT
WAR CONTRACT TERMINATIONS AND SETTLEMENTS - FRIME CONTRACTS
Quarter Ending September 30, 1944
CUMULATIVE
FOR MONTH OF:
CUMULATIVE
ITEM
THROUGH
THROUGH
JUNE 30, 1944
JULY
AUGUST
SEPTEMBER
SEPT. 30, 1944
ALL CONTRACTS
Number
86
(Number)
Terminations Effected
73
44
66
35
238
Terminations Settled
73
44
40
223
Terminations Awaiting Settlement 20
20
20
15
15
Contract Price of Items Cancelled
(Thousands of Dollars)
Terminations Effected
6,318
4,614
2,660
2,875
16,467
Terminations Settled
4,810
4,816
2,660
2,672
14,958
Terminations Awaiting
Settlement
1,508
1,306
1,306
1,509
1,509
FIXED PRICE CONTRACTS
Number
(Number)
Terminations Effected
86
73
44
35
238
Claims Filed
31
3
-
2
36
Terminations Awaiting Claim
5
3
3
3
3
Settlements Without Claim
50
72
44
33
199
Settlements With Claim
16
1
-
7
24
Claims Awaiting Settlement
15
17
17
12
12
Contract Price of Items Cancelled
(Thousands of Dollars)
Terminations Effected
6,318
4,614
2,660
2,875
16,467
Claims Filed
4,690
356
-
257
5,303
Terminations Awaiting Claim
432
136
136
261
261
Settlements Without Claim
1,196
4,554
2,660
2,493
10,903
Bettlements With Claim
3,614
262
-
179
4,055
Claims Awaiting Settlement
1,076
1,170
1,170
1,248
1,248
Amount of Claim
Claims Filed
534
4
7
16
561
Claims Settled
276
41
-
10
327
Claims Awaiting Settlement
258
221
228
234
234
Amount of Settlement
Gross Settlement
240
23
-
23
286
Disposal Credits
1
-
-
13
14
Net Settlement
239
23
-
10
272
Cost of Property Acquired in
Settlement
-
21
-
-
21
COST-PLUS-A-FEE CONTRACTS
Number
(Number)
Terminations Effected
Terminations Settled
1011
Terminations Awaiting Settlement
Estimated Cost of Items Cancelled
Terminations Effected
Terminations Settled
Terminations Awaiting Settlement
AB reported by the Treasury Department to the Office of Contract Settlement.
Data entered in these lines are "Status as of the end of Month".
70
Regraded Unclassified
TABLE 6
APPENDIX C
DEFENSE PLANT CORPORATION - RECONSTRUCTION FINANCE CORPORATION
WAR CONTRACT TERMINATIONS AND SETTLEMENTS - PRIME CONTRACTS
Quarter Ending September 30, 1944 &
CUMULATIVE
FOR MONTH OF:
CUMULATIVE
ITEM
THROUGH
THROUGH
JULY 31, 1944
JULY
AUGUST
SEPTEMBER
SEPT. 50, 1944
ALL CONTRACTS
Number
(Number)
Terminations Effected
73,754
2,176
2,721
78,651
Terminations Settled
72,598
2,188
2,869
77,655
Terminations Awaiting Settlement
1,156
1,144
996
996
Contract Price of Items Canceled
(Thousands of Dollars)
Terminations Effected
483,357
36,557
32,719
552,633
Terminations Settled
364,726
35,213
32,990
432,929
Terminations Awaiting Settlement
118,631
119,975
119,704
119,704
FIXED-PRICE CONTRACTS
Number
(Number)
Terminations Effected
73,699
2,176
2,720
78,595
Claims Filed
3,981
76
53
4,110
Terminations Awaiting Claim
211
236
178
178
Settlements Without Claim
69,507
2,075
2,725
74,307
Bettlements With Claim
3,057
107
137
3,301
Claims Awaiting Settlement
924
893
809
809
Contract Price of Items Canceled
(Thousands of Dollars)
Terminations Effected
478,766
36,577
32,631
547,954
Claims Filed
160,697
15,512
9,205
185,414
Terminations Awaiting Claim
8,985
11,517
14,223
14,223
Settlements Without Claim
309,084
18,513
20,720
348,317
Settlements With Claim
52,197
16,195
11,906
80,298
Claims Awaiting Settlement
108,500
107,817
105,116
105,116
Amount of Claim
Claima Filed
15,263
2,127
1,885
19,275
Claims Sottled
7,040
986
1,804
9,830
Claims Awaiting Settlement
8,223
9,364
9,445
9,445
Amount of Settlement
Gross Settlement
4,584
687
1,552
6,823
Disposal Credite o
597
67
77
741
Not Settlement
3,987
620
1,475
6,082
Cost of Property Acquired in Settlement
181
-
-
181
COST-PLUS-A-FKE CONTRACTS
Number
(Number)
Terminations Effected
55
-
1
56
Terminations Settled
34
6
7
47
Terminations Awaiting Settlement
21
15
9
9
(Thousands of Dollars)
Estimated Cost of Items Canceled
Terminations Effected
4,591
-
88
4,679
Terminations Settled
3,445
505
364
4,314
Terminations Awaiting Settlement
1,146
641
365
365
Ae reported by the Reconstruction Finance Corporation to the Office of Contract Settlement.
b
Data entered in these lines are "Statua as of the end of Month".
Cumulative from May 1 only. Gross settlement is therefore understated since it VSA estimated by adding
incomplete Disposal Credite to Net Settlement figures.
o
Incomplete - Includes data for Defense Plant Corporation, Machine Tool Pool terminations only.
8c
Regraded Unclassified
272
WAR PRODUCTION BOARD TABULATIONS
Only terminations for which the undelivered values were
$100,000 or more are included. While the number of terminations ex-
cluded ie large, the total of the undelivered values is not.
Data in tables 7 through 17 show the following:
1. The largest number and value of terminated commitments have
been in the heavily industrialized East North Central, Middle Atlantic,
New England, and Pacific regions of the United States. This is not only
true for total terminations, but 18 also true for aircraft, ships, and
ordnance separately.
2. The distribution of undelivered value of terminated contracts
among the geographic regions 1e approximately the same as the distribution
of outstanding contract commitments. There has, however, been & greater
concentration of terminations than of awards and outstanding commitments
in the Middle Atlantic and East North Central regions. And there has been
a lesser proportion of terminations than of awards and outstanding com-
mitments in the Pacific region.
3. Size of claim is an important factor affecting the speed of
settlement. Experience of the War and Navy Departments has been that, on
the average, the larger the claim the longer the time between termination
and filing. It also has been that the larger the claim, the longer the
time between filing and final settlement.
4. Experience of the War and Navy Departments indicates that
subcontracts have slowed speed of settlement mainly for the larger claims
involving substantial numbers of subcontracts.
5. On the average, the larger the claim of the prime contractor
has been, the greater number of first tier subcontractor claims. For War
and Navy Department terminations, the number of such subcontractor claims
has varied from less than one on the average for prime claims of less than
$10,000 to over 44 on the average for prime claims of $1,000,000 or more.
The average number of first tier claims has been 3.
6. Approximately 19 percent of the net settlements paid to prime
contractors has in turn been paid as net settlements to first tier subcon-
tractors.
7. Net settlements paid to prime contractors have averaged about
84 percent of their net claims; the comparable figure for first tier subcon-
tracts 18 elightly lower -- 82%.
8. 150 companies have absorbed about 80% of the $14,339,000,000
of terminations covered by the War Production Board sample. These companies
are those which have filed large claims and have a large number of subcon-
tractors.
9c
Regraded Unclassified
273
TABLE 7
APPENDIX C
NUMBER AND PERCENTAGE DISTRIBUTIONS FOR PRIME WAR CONTRACT TERMINATIONS
By Geographic Region and Major Object
January - July 1944 a
MAJOR OBJECT
GEOGRAPHIC REGION
TOTAL
Aircraft
Ships
Ordnance
Other
NUMBER OF TERMINATIONS
TOTAL
5,402
1,060
212
2,002
2,128
New England
547
117
25
217
184
Middle Atlantic
1,879
381
54
600
844
East North Central
1,919
360
63
821
675
West North Central
236
32
13
80
111
South Atlantic
225
47
13
66
99
East South Central
132
11
4
65
52
West South Central
116
11
11
53
41
Mountain
18
2
-
9
7
Pacific
260
79
25
65
91
Outside U.S. & Unassignable
70
20
-
26
24
PERCENTAGE DISTRIBUTION BY GEOGRAPHIC REGION
TOTAL
100
100
100
100
100
New England
10
11
14
11
9
Middle Atlantic
35
36
25
30
40
East North Central
36
34
30
41
32
West North Central
4
3
6
4
5
South Atlantic
4
4
6
3
5
East South Central
3
1
2
3
2
West South Central
2
1
5
3
2
Mountain
b
b
-
1
b,
Pacific
5
8
12
3
4
Outside U.S. & Unassignable
1
2
-
1
1
PERCENTAGE DISTRIBUTION BY MAJOR OBJECT
TOTAL
100
20
4
37
39
New England
100
21
5
40
34
Middle Atlantic
100
20
3
32
45
East North Central
100
19
3
43
35
West North Central
100
14
5
34
47
South Atlantic
100
21
6
29
44
East South Central
100
8
3
49
40
West South Central
100
9
9
46
36
Moutain
100
11
-
50
39
Pacific
100
30
10
25
35
Outside U.S. & Unassignable
100
29
-
37
34
a
Included are all War and Navy Department fixed-price and cost-plus-a-fee prime var contract
terminations for which the contract price of items canceled 1e $100,000 or more, and pending
settlement on January 1 or terminated from January through July 1944. The excluded termina-
tions for which the contract price of items canceled 18 less than $100,000 number 12,834,
for which the canceled portion totals $224,000,000.
b
Less than 0.5 percent.
Source: WAR PRODUCTION BOARD
llc
Regraded Unclassified
TABLE 8
APPENDIX C
CONTRACT PRICE OF ITEMS CANCELED AND PERCENTAGE DISTRIBUTIONS
FOR PRIME WAR CONTRACT TERMINATIONS
By Geographic Region and Major Object
January-July 1944
MAJOR OBJECT
GEOGRAPHIC REGION
TOTAL
Aircraft
Ships
Ordnance
Other
CONTRACT PRICE OF ITEMS CANCELED (MILLIONS OF DOLLARS)
TOTAL
14,339
5,273
1,316
5,904
1,846
New England
1,019
332
188
400
99
Middle Atlantic
4,362
1,529
557
1,543
733
East North Central
5,331
1,288
348
3,123
572
West North Central
731
360
14
280
77
South Atlantic
640
380
15
110
135
East South Central
443
359
8
59
17
West South Central
210
66
73
45
26
Mountain
67
1
-
65
1
Pacific
1,208
894
113
144
57
Outside U. S. & Unassignable
328
64
-
135
129
PERCENTAGE DISTRIBUTION BY GEOGRAPHIC REGION
TOTAL
100
100
100
100
100
New England
7
6
14
7
5
Middle Atlantic
30
29
42
26
40
East North Central
37
25
26
53
31
West North Central
5
7
1
5
4
South Atlantic
5
7
1
2
7
East South Central
3
7
1
1
1
West South Central
2
1
6
1
2
Mountain
1
-
1
P
Pacific
8
17
9
2
3
Outside U. S. & Unassignable
2
1
-
2
7
PERCENTAGE DISTRIBUTION BY MAJOR OBJECT
TOTAL
100
37
9
41
13
New England
100
33
18
39
10
Middle Atlantic
100
35
13
35
17
East North Central
100
24
6
59
11
West North Central
100
49
2
38
11
South Atlantic
100
60
2
17
21
East South Central
100
81
2
13
4.
West South Central
100
31
35
22
12
Mountain
100
2
-
97
1
Pacific
100
74
9
12
5
Outside U. 8. & Unassignable
100
20
-
41
39
a
Included are all War and Navy Department fixed-price and cost-plus-a-fee prime War contract
terminations for which the contract price of items canceled 10 $100,000 or more, and pend-
ing settlement on January 1 or terminated from January through July 1944. The excluded
terminations for which the contract price of items canceled 18 less than $100,000'num-
ber 12,834, for which the canceled portion totals $224,000,000.
b
Less than 0.5 percent.
Source: WAR PRODUCTION BOARD
12c
Regraded Unclassified
274
TABLE 9
APPENDIX C
PERCENTAGE DISTRIBUTION OF AMOUNT OF WAR SUPPLY CONTRACTS
By Geographic Region and Status
Through July 1944
UNDELIVERED
CONTRACT PRICE
CUMULATIVE
AMOUNT OF
OF ITEMS
GEOGRAPHIC
AMOUNT OF
ACTIVE
CANCELED BY
REGION
ALL CONTRACTE
CONTRACTS
TERMINATIONS
b/
e
TOTAL
100
100
100
New England
9
9
7
Middle Atlantic
24
22
31
East North Central
33
32
38
West North Central
6
6
5
South Atlantic
6
6
5
East South Central
2
2
3
West South
5
6
2
Mountain
1
C
1
Pacific
14
18
8
Adjusted to reflect all contract terminations and reductions.
b
The percentage distribution shown here differs from that shown in
Table 8, which is based on data including terminations outside the
U. S. and terminations unassignable by geographic region.
Less than 0.5 percent.
Source: WAR PRODUCTION BOARD
13c
Regraded Unclassified
TABLE 10
APPENDIX o
NUMBER, AMOUNT OF CLAIM, AND PERCENTAGE DISTRIBUTIONS
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATION CLAIMS SETTLED
By Size of Claim and Lapee of Time from Effective Date of Termination
January - July 1944 B
LAPSE OF TIME FROM EFFECTIVE DATE
TO SETTLEMENT DATE
TOTAL
TOTAL
SIZE OF CLAIMS
CLAIMS
CLAIMS
0 to 6
6 to 12
12 Months
(Dollars)
FILED
SETTLED
Months
Months
or More
NUMBER OF CLAIMS SETTLED
TOTAL
2,373
1,665
874
610
181
1 - 9,999
499
358
244
90
24
10,000 - 49,999
783
568
342
181
45
50,000 - 99,999
410
288
145
109
34
100,000 - 499,999
569
388
134
191
63
500,000 - 999,999
76
46
7
30
9
1,000,000 or More
36
17
2
9
6
PERCENTAGE DISTRIBUTION BY LAPSE OF TIME
TOTAL
100
52
37
11
1 - 9,999
100
68
25
7
10,000 - 49,999
100
60
32
8
50,000 - 99,999
100
50
38
12
100,000 - 499,999
100
35
49
16
500,000 - 999,999
100
15
65
20
1,000,000 or More
100
12
53
35
AMOUNT OF CLAIMS SETTLED (THOUSANDS OF DOLLARS)
TOTAL
342,984
221,373
54,349
93,395
73,629
1 - 9,999
2,404
1,551
1,051
420
80
10,000 - 49,999
21,842
15,715
9,023
5,424
1,268
50,000 - 99,999
29,298
20,289
10,035
7,672
2,582
100,000 - 499,999
124,724
84,215
26,889
41,557
15,769
500,000 - 999,999
51,912
32,076
4,573
20,873
6,630
1,000,000 or More
112,804
67,527
2,778
17,449
47,300
PERCENTAGE DISTRIBUTION BY LAPSE OF TIME
TOTAL
100
25
42
33
1 - 9,999
100
68
27
5
10,000 - 49,999
100
57
35
8
50,000 - 99,999
100
49
38
13
100,000 - 499,999
100
32
49
19
500,000 - 999,999
100
14
65
21
1,000,000 or More
100
4
26
70
a
Included are all War and Navy Department fixed-price termination claims for which the contract
price of items canceled is $100,000 or more which were settled from January through July 1944.
The excluded termination claims settled for which the contract price of items canceled 1a
less than $100,000 number 2597, for which the amount of claim totals $18,600,000.
Source: WAR PRODUCTION BOARD
140
Regraded Unclassified
275
APPENDLE C
TABLE 11
NUMBER, AMOUNT OF CLAIM, AND PERCENTAGE DISTRIBUTIONS
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATION CLAIMS PENDING
By Size of Claim and LAPSE of Time From Effective Date or Termination
January - July 1944
LAPSE OF TIME FROM EFFECTIVE DATE TO JULY 31, 1944
TOTAL
TOTAL
SIZE OF CLAIM
CLAIMS
CLAIMS
0 to 6
6 to 12
12 Months
(Dollars)
FILED
PENDING
Months
Months
or More
NUMBER OF CLAIMS PENDING
TOTAL
2,373
708
419
219
70
1 - 9,999
499
141
109
26
6
10,000 - 49,999
783
215
142
51
22
50,000 - 99,999
410
122
71
38
13
100,000 - 499,999
569
181
84
73
24
500,000 - 999,999
76
30
9
19
2
1,000,000 - Or More
36
19
4
12
3
PERCENTAGE DISTRIBUTION BY LAPSE OF TIME
TOTAL
100
59
31
10
100
77
19
4
1 - 9,999
100
66
24
10
10,000 - 49,999
100
58
31
11
50,000 - 99,999
100
47
40
13
100,000 - 499,999
100
30
63
7
500,000 - 999,999
100
21
63
16
1,000,000 Or More
AMOUNTS OF CLAIMS PENDING (THOUSANDS OF DOLLARS)
TOTAL
542,984
121,611
39,705
52,241
29,665
1 - 9,999
2,404
853
734
94
25
10,000 - 49,999
21,842
6,127
4,056
1,487
584
50,000 - 99,999
29,298
9,009
5,284
2,782
943
100,000 - 499,999
124,724
40,509
17,381
17,736
5,392
500,000 - 999,999
51,912
19,836
6,003
12,510
1,323
1,000,000 Or More
112,804
45,277
6,247
17,632
21,398
PERCENTAGE DISTRIBUTION BY LAPSE OF TIME
TOTAL
100
33
43
24
1 - 9,999
100
86
11
3
10,000 - 49,999
100
66
24
10
50,000 - 99,999
100
59
31
10
100,000 - 499,999
100
43
44
13
500,000 - 999,999
100
30
63
7
1,000,000 Or More
100
14
39
47
Included are all War and Navy Department fixed-price termination claims for which the con-
tract price of items canceled 18 $100,000 or more which were pending settlement on July 31,
1944. The excluded pending termination claims for which the contract price of items can-
celed is less than $100,000 number 524, for which the amount of claim totals $18,100,000.
Source: WAR PRODUCTION BOARD
15c
Regraded Unclassified
APPENDIX C
TABLE 12
NUMBER, AMOUNT OF CLAIM, AND PERCENTAGE DISTRIBUTIONS
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATIONS FILED
By Size of Claim and Lapse of Time from Effective Date of
Termination to Filing Date of Claim
January - July 1944
SIZE OF
TOTAL
LAPSE OF TIME FROM EFFECTIVE DATE TO FILING DATE
CLAIMS
CLAIMS
0 to
6 to
12 Months
(Dollars)
FILED
6 Months
12 Months
or More
NUMBER OF CLAIMS FILED
TOTAL
2,373
2,062
273
38
1 - 9,999
499
450
41
8
10,000 - 49,999
783
700
79
4
50,000 - 99,999
410
354
48
8
100,000 - 499,999
569
477
78
14
500,000 - 999,999
76
59
17
-
1,000,000 or more
36
22
10
is
PERCENTAGE DISTRIBUTION BY LAPSE OF TIME
TOTAL
100
87
11
2
1 - 9,999
100
90
8
2
10,000 - 49,999
100
89
10
1
50,000 - 99,999
100
86
12
2
100,000 - 499,999
100
84
14
2
500,000 - 999,999
100
78
22
-
1,000,000 or more
100
61
28
11
AMOUNT OF CLAIMS FILED (THOUSANDS OF DOLLARS)
TOTAL
342,984
237,567
50,549
54,868
1 - 9,999
2,404
2,230
147
27
10,000 - 49,999
21,842
19,418
2,315
109
50,000 - 99,999
29,298
25,191
3,484
623
100,000 - 499,999
124,724
102,913
17,795
4,016
500,000 - 999,999
51,912
40,568
11,344
-
1,000,000 or more
112,804
47,247
15,464
50,093
PERCENTAGE DISTRIBUTION BY LAPSE OF TIME
TOTAL
100
69
15
16
1 - 9,999
100
93
6
1
10,000 - 49,999
100
89
11
50,000 - 99,999
100
86
12
2
100,000 - 499,999
100
83
14
3
500,000 - 999,999
100
78
22
1,000,000 or more
100
42
14
44
Included are all War and Navy Department fixed-price termination claims for which the
contract price of items canceled 1e $100,000 or more which were pending settlement on
January 1 or filed from January through July 1944. The excluded termination claims
filed for which the contract price of items canceled 1a less than $100,000 number 2864,
for which the amount of claim totals $36,800,000.
Less than 0.5 percent.
Source: WAR PRODUCTION BOARD
16c
Regraded Unclassified
276
APPENDIX c
TABLE 13
NUMBER, AMOUNT OF CLAIM, AND PERCENTAGE DISTRIBUTIONS
FOR PRIME FIXED-PRICE WAR CONTRACT TERMINATION CLAIMS SETTLED
By Size of Claim and Lapse of Time from Filing Date to Settlement Date
January - July 1944
LAPSE OF TIME FROM FILING DATE
TOTAL
TO SETTLEMENT DATE
SIZE OF CLAIM
CLAIMS
o to 6
6 to 12
12 Months
(Dollars)
SETTLED
Months
Months
or More
NUMBER OF CLAIMS SETTLED
TOTAL
1,665
1,402
228
35
1 - 9,999
358
335
22
1
10,000 - 49,999
568
498
63
7
50,000 - 99,999
288
243
38
7
100,000 - 499,999
388
281
91
16
500,000 - 999,999
46
35
8
3
1,000,000 or More
17
10
6
1
PERCENTAGE DISTRIBUTION BY LAPSE OF TIME
TOTAL
100
84
14
2
1 - 9,999
100
94
6
b/
10,000 - 49,999
100
88
11
1
50,000 - 99,999
100
84
13
3
100,000 - 499,999
100
72
24
4
500,000 - 999,999
100
76
17
7
1,000,000 or More
100
59
35
6
AMOUNT OF CLAIMS SETTLED (Thousands of Dollars)
TOTAL
221,373
171,598
40,401
9,374
1 - 9,999
1,551
1,435
111
5
10,000 - 49,999
15,715
13,548
1,937
230
50,000 - 99,999
20,289
17,069
2,677
543
100,000 - 499,999
84,215
59,679
19,911
4,625
500,000 - 999,999
32,076
24,030
5,519
2,527
1,000,000 or More
67,527
55,837
10,246
1,444
PERCENTAGE DISTRIBUTION BY LAPSE OF TIME
TOTAL
100
78
18
4
1 - 9,999
100
93
7
b
10,000 - 49,999
100
86
12
2
50,000 - 99,999
100
84
13
3
100,000 - 499,999
100
71
24
5
500,000 - 999,999
100
75
17
8
1,000,000 or More
100
83
15
2
Included are all War and Navy Department fixed-price termination claims for which the con-
tract price of items canceled 16 $100,000 or more which were settled from January through
July 1944. The excluded settled termination claima for which the contract price of items
canceled is less than $100,000 number 2,597, for which the amount of claim totals $18,600,000.
Less than 0.5 percent.
Source: WAR PRODUCTION BOARD.
17c
Regraded Unclassified
AFFENDIX o
TABLE 14
NUMBER OF PRIME FIXED PRICE WAR CONTRACT TERMINATIONS CLAIMS SETTLED
By Size of Claim, Number of Subcontractors' Claims Submitted, and
Lapse of Time from Effective Date to Settlement Date
January - July 1944
LAPSE OF TIME FROM EFFECTIVE DATE
TOTAL
TO SETTLEMENT DATE
SIZE OF CLAIM AND NUMBER OF
CLAIMS
o to 6
6 to 12
12 Months
SUBCONTRACTORS CLAIMS SUBMITTED
SENTLED
Months
Months
Or More
All Claims - Total
1,665
874
610
181
No Subsontractors' Claims Submitted
731
421
242
68
1
.
"
"
284
170
91
23
2 3
.
-
"
238
121
99
18
4 5
.
-
-
156
74
67
15
6 10
a
"
-
136
57
50
29
11 20
.
#
#
82
23
46
13
21 or More
.
#
-
38
8
15
15
Claims of $1 to $9,999 Total
358
244
90
24
No Subcontractors' Claims Submitted
241
159
65
17
1
#
#
"
62
lab
15
3
2 3
.
#
# -
36
26
7
3
4 5
=
=
#
13
12
1
-
6 10
.
"
"
3
2
#
1
11 20
"
"
"
3
1
2
-
21 or More
#
#
"
-
-
#
.
Claims of $10,000 to $49,999 Total
568
342
181
45
No Suboontractors' Claims Submitted
262
162
80
20
1
-
"
.
115
71
38
6
2 3
.
#
"
96
58
33
5
4 5
-
=
=
54
31
18
5
6 10
-
#
=
31
16
10
5
11 20
#
#
#
7
4
2
1
21 or More
-
"
=
3
-
-
3
Claims of $50,000 to $99,999 Total
288
145
109
34
No Suboontractora' Claims Submitted
107
53
42
12
1
"
#
-
62
36
21
5
2 3
-
"
-
44
19
20
5
4. 5
n
a
"
27
12
12
3
6 - 10
=
If
al
32
18
9
5
11 20
#
=
et
14
6
5
- 3
21 or More
"
-
-
2
1
-
1
Claims of $100,000 to $499,999 Total
388
134
191
a
No Subsontractore' Claims Submitted
112
45
50
17
1
.
-
.
39
18
14
7
2 3
.
.
-
55
18
33
4
4 5
.
-
.
53
16
31
6
6 10
E
-
#
64
21
26
17
11 20
.
.
I
47
12
29
6
21 or More
.
-
.
18
4
8
6
Claims of $500,000 to $999,999 Total
46
7
30
9
No Subcontractore' Claims Submitted
8
2
4
2
1
.
E
#
6
1
3
2
2 3
#
#
=
6
-
5
1
4 5
"
-
et
6
2
3
1
6 10
"
#
-
6
-
5
1
11 20
#
.
#
8
-
7
1
21 or More
If
E
#
6
2
3
1
Claims of $1,000,000 or More Total
17
2
9
6
No Subcontractors' Claims Submitted
1
.
1
-
1
#
#
if
-
-
.
-
2 3
#
-
.
1
-
1
-
4 5
.
.
-
3
1
2
.
6 10
.
.
E
A
-
-
-
11 20
.
.
#
3
-
1
2
21 or More
et
-
#
9
1
4
4
P
e/
Includes all War and Savy Department fixed-price termination claims for which the contract price of items can-
celed 18 $100,000 or more which vere settled from January through July 1944. The excluded settled termination
claims for which the contract price of items canceled vas less than $100,000 number 2,597, for which the amount
of claim totals $18,600,000.
18c
Source: WAR PRODUCTION BOARD
Regraded Unclassified
277
TABLE 15
APPENDIX C
NUMBER AND PERCENT OF SETTLED PRIME CONTRACTOR CLAIMS
REQUIRING SIX MONTHS OR MORE FOR SETTLEMENT
By Size of Claim and Number of Subcontractor Claims
January - July 1944
SIZE OF CLAIM (Dollars)
NUMBER OF SUBCONTRACTORS'
ALL
1 -
10,000 - 50,000 - 100,000 - 500,000 or
CLAIMS SUBMITTED
CLAIMS
9,999
49,000
99,000
499,999
More
ALL CLAIMS SETTLED
Total Prime Claims
1,665
358
568
288
388
63
Requiring 6 Months or Over
791
114
226
143
254
54
Percent-6 Months or Over
48
32
40
50
65
86
NO SUBCONTRACTOR CLAIMS
Total Prime Claims Settled
731
241
262
107
112
9
Requiring 6 Months or Over
310
82
100
54
67
7
Percent -6 Months or Over b/
42
34
38
50
60
78
1 - 5 SUBCONTRACT CLAIMS
Total Prime Claims Settled
678
111
265
133
147
22
Requiring 6 Months or Over
313
29
105
66
95
18
Percent-6 Months or Over
46
26
40
50
65
82
6 - 10 SUBCONTRACTOR CLAIMS
Total Prime Claims
136
3
31
32
64
6
Requiring 6 Months or Over
79
1
15
14
43
6
Percent-6 Months or Over
58
33
48
44
67
100
11 OR MORE SUBCONTRACTOR CLAIMS
Total Prime Claims Settled
120
3
10
16
65
26
Requiring 6 Months or Over
89
2
6
9
49
23
Percent-6 Months or Over
74
67
60
56
75
88
Includes all War and Navy Department fixed-price termination claims for which
the contract price of items canceled is $100,000 or more which were settled
from January through July 1944. The excluded termination claims number 2,597,
for which the amount of claim totala $18,600,000.
Number of prime contractor claims requiring 6 months or more for settlement 88
a percentage of total prime contract claims settled.
Source: WAR PRODUCTION BOARD
19c
Regraded Unclassified
TABLE 16
APPENDLI C
SUBCONTRACTORS . SETTLEMENTS AS RELATED TO PRIME CONTRACTORS' SETTLEMENTS
By Size of Claim
January - July 1944
SIZE OF TOTAL GROSS CLAIM (Dollars)
1 -
10,000
-
50,000
-
100,000
-
500,000
-
1,000,000
ITEM
TOTAL
9,999
49,999
99,999
499,999
999,999
or More
PRIME CONTRACTORS' CLAIMS
(Number)
Number
1,665
358
568
288
588
46
17
(Thousands of Dollars)
Amount For Benefit of Prime Contractors:
Gross Claim
183,340
1,316
13,456
17,479
72,509
25,668
52,912
Gross Settlement
157,995
1,134
11,455
14,582
59,536
21,849
49,439
Disposal Credit
26,962
222
2,880
3,642
10,051
2,673
7,494
Net Claim
156,378
1,094
10,576
13,837
62,458
22,995
45,418
Net Settlement
131,033
912
8,575
10,940
49,485
19,176
41,945
SUBCONTRACTORS CLAIMS
(Number)
Number Approved
5,056
233
898
702
2,111
360
752
(Thousands of Dollars)
Amount of:
Net Claim
38,033
235
2,259
2,810
11,706
6,408
14,615
Net Settlement
31,135
209
1,745
2,137
9,392
5,436
12,216
(Number)
Number of Subcontractors' Claims
Per Prime Contractor Settlement
3.0
0.7
1.6
2.4
5.4
7.8
44.2
(Percent)
Subcontractors' Percent of Total
Net Settlement
19.2
18.6
16.9
16.3
16.0
22.1
22.6
Net Settlement B.B percent of Net Claim for:
Prime Contractors
83.8
83.4
81.1
79.1
79.2
83.4
92.4
Subcontractors
81.9
88.9
77.2
76.0
80.2
84.8
83.6
a
Included are all War and Navy Department fixed-price termination claims for which the contract price
of items canceled 1a $100,000 or more which were settled from January through July 1944. The ex-
cluded termination claims for which the contract price of items canceled is less than $100,000 num-
bor 2597, for which the amount of claim totals $18,600,000.
Source: WAR PRODUCTION BOARD
20c
Regraded Unclassified
278
TABLE 17
APPENDII C
NUMBER AND PERCENTAGE DISTRIBUTIONS OF COMPANIES HAVING PRIME CONTRACT TERMINATIONS
By Number of Terminations Per Company and Total Contract Price of Items Canceled per Company
January - July 1944 a/
AMOUNT TERMINATED
TOTAL
NUMBER OF TERMINATIONS PER COMPANY
PER COMPANY
NUMBER OF
Tvo or
Four
Six to
Eleven-
Twenty-One
(Dollars)
COMPANIES
One
Three
or Five
Ten
Twenty
Or More
NUMBER OF COMPANIES
TOTAL
2,152
1,535
559
118
82
37
21
100,000-249,999
645
636
9
-
-
-
-
250,000-499,999
424
321
103
-
-
-
-
500,000-999,999
370
198
160
11
1
-
-
1,000,000-4,999,999
461
148
228
59
24
2
-
5,000,000-9,999,999
96
19
26
19
26
6
-
10,000,000-49,999,999
107
12
26
26
21
18
24
50,000,000-99,999,999
17
1
6
1
5
4
-
100,000,000 or More
32
-
1
2
5
7
17
PERCENTAGE DISTRIBUTION BY AMOUNT TERMINATED PER COMPANY
TOTAL
100
100
100
100
100
100
100
100,000-249,999
30
48
2
-
-
-
-
250,000-499-999
20
24
18
-
-
-
-
500,000-999,999
17
15
28
9
1
-
-
1,000,000-4,999,999
21
11
41
50
29
5
-
5,000,000-9,999,999
4
1
5
16
32
16
-
10,000,000-49,999,999
5
1
5
22
26
49
19
50,000,000-99,999,999
1
D/
1
1
6
11
-
100,000,000 or More
2
,
2
6
19
81
PERCENTAGE DISTRIBUTION BY NUMBER OF TERMINATIONS PER COMPANY
TOTAL
100
62
26
5
4
2
1
100,000-249,999
100
99
1
-
-
-
-
250,000-499,999
100
76
24
-
-
-
-
500,000-999,999
100
54
43
3
b/
-
-
1,000,000-4,999,999
100
32
50
13
5
b
-
5,000,000-9,999,999
100
20
27
20
27
6
-
10,000,000-49,999,999
100
11
24
24
20
17
4
50,000,000-99,999,999
100
6
35
6
29
24
-
100,000,000 or More
100
-
3
6
16
22
53
8.
Included are all War and Navy Department fixed-price and cost-plus-a-fee prime war contract
terminations for which the contract price of itoms canceled 1e $100,000 or more which were
pending on January 1 or were terminated from January through July 1944. The excluded ter-
minations for which the contract price of items canceled is less than $100,000 number 1284,
for which the canceled portion totals $224,000,000.
D
Less than 0.5 percent.
Source: WAR PRODUCTION BOARD
21c
Regraded Unclassified
TOP SECRET
COPY NO. 46270
C.S.L.L.(44) 3rd meeting
COMBINED SUBCOMMITTEL ON MUTUAL LEND-LEASE AID
BETWEEN THE U.S. AND U.K.
MINUTES of a Meeting held in Room 3438 in the
U.S.Treasury, on 4th November, 1944
at 2:30 Dalla
PRESENT
Mr. White (In the Chqir)
U.S.Representatives
U.K.Representatives
Mr. Casaday
Rt. Hon. Bon Smith
Lord Keynes
Mr. Taft
Sir Charles Hambro
Mr. Fetter
Mr. Hutton
Mr. Helmore
Mr. Currie
Mr. Goschen
Mr. Davidson
Mr. Havlik
Mr. Coe) Joint Secretaries
Mr. Lee)
ANNEX "A" OF THE U.K. CASE
1,
The discussion was mainly concerned with the elucidation
of many of the details given in Annex "A" of the U.K. case,
especially (1) the prospective U.K. balance of payments in 1945
given in paragraph 12 of the Annex (11) the estimated balance
sheet for 1945 of the gold and dollar reserve position of the
sterling area pool given in paragraph 14 of the Annex.
2.
LORD KEYNES said that the UK representatives would be
glad to answer questions to the best of their ability but he
emphasised that the answers would require later checking. He
explained that the figures in the balance of payments had been
prepared some time ago, that since they were prepared some of them
had been superseded by later estimates, and that this and other
tables could necessarily only be regarded as forecasts. MR. CURRIE
emphasised the relation of the British financial analysis to the
proposals in Chapter 3 of the U.K. case. He said that it would
be particularly helpful to the U.S. group 1f information could
be given to construct a balance of payments for the United Kingdom
and the Sterling Area with the U.S. for 1945, with a comparative
statement in respect of 1943.
3. DETAILS INCLUDED IN THE DRAFT BALANCE OF PAYMENTS FOR 1945,
(a) Requirements in the U.S.
MR. CURRIE asked if the U.K. representatives
could indicate upon what objects the cash dollar
expenditure, implied in the table (1.e. the difference
between the figures for total expenditure in the U.S.
and the Lend-Lease demands), would be incurred, MR. COE
said that the over-all figure for imports seemed to be
$520 millions.
The following explanations were given by the U.K.
representatives:-
Food, Civilian.
LORD KEYNES and MR. HUTTON said that dollar
food import items included Caribbean sugar ($71 millions),
Iceland products ($10 millions), small purchases
($6-8 millions,, or a total of about $90 millions,
Regraded Unclassified
Food for Forces.
200
Cash items amounted to $10-12 millions,
according to MR. HUTTON, and comprised partly
stores for NAAFI and partly so-called luxury foods
(e.g. pickles) which had been taken off lend-lease.
Tobacco,
MR. HUTTON said that the cost ef the cash
imports into the U.K. (1.e. tobacco for civilians)
was $90 millions.
Materials,
SIR CHARLES HAMBRO said the cash imports
planned in 1945 under head 3 (certain raw materials
and manufactured goods) amounted to $40 millions,
011.
MR. LEE thought that the total oil figure
included about $90 millions in respect of cash
items such as the purchase of equipment, crude
oil In the Caribbean, etc., but that figure would
need checking.
Other Imports.
It was agreed that D breakdown of the figure
of $148 millions should be supplied.
Interest, etc.
MR. WHITE expressed surprise that estimated
payments ($60 millions) should exceed estimated
receipts under this head, but LORD KEYNES said that
this was not surprising having regard to the
realisation and mortgaging of U.K. investments in
the U.S. He thought that the Bank of England's
figures, here used, could be taken as accurate,
Other Payments.
LORD KEYNES said that the figure of $280 millions
included about $70 millions for motion picture payments,
large sums in respect of U.K. government expenditure
in the U.S. and other items such as remittance
payments and insurance premiums. A breakdown was
promised.
(b) Receipts: U.K. exports to U.S.
MR. WHITE and others asked whether the figure
of $120 millions was not low. LORD KEYNES and
MR. HELMORE said that in their view the ostimate
for the total exports of the U.K. in 1945--$1740
millions--was too high, that it was doubtful
whether the goods would be produced and exported
in the face of competing demands for goods on the
home market, and that a large proportion of the
increase would inevitably go to the goods-starved
countries in the Sterling Area, MR. HELMORE said that
the types of goods in respect of which the U.K. could
most easily expand its exports were ones which the
U.S. would not went. Several U.S. representatives
asked whether there was not a disparity between the
large expansion of exports assumed in the overall
figure of $1740 millions and the fact that no increase
in exports to the U.S. was apparently contemplated,
⑉2⑉
Regraded Unclassified
They stated that since the market existed and
since the allocation of manpower for exports
would be much increased, it seemed plausible
that exports to the U.S. should increase, LORD
KEYNES undertook to communicate a note in defence
of the U.K. estimate.
4. ESTIMATED 1945 BALANCE SHEET OF STERLING AREA GOLD AND DOLLAR
RESERVES.
(a) Sterling Area: Commercial Balance with U.S.
MR. COE asked whether any figures other than
the prospective deficit of $100 millions were
available. He said that U.S. trade figures for
1943 indicated a belance, excluding troop pay,
which was favorable to the rest of the sterling
area by $300 millions. LORD KEYNES said that trade
figures were of doubtful value because of shipping
and other complications. He reforred to the figures
for 1944 in his memorandum of October 31, which
showed most of the sterling area to be running a
deficit with the U.S. and said that he doubted
whether a better broakdown could be given.
Reciprocal Ald,
There was some discussion on the question
of what figure had been assumed for sterling area
reciprocal aid in raw material and food exports.
LORD KEYNES said it had been assumed that the present
levels would continue. MR. COE estimated a drop
from $140 millions in 1944 to $100 millions in 1945.
(b) Gold,
MR. WHITE asked for a breakdown of the estimate
of $160 millions increase in gold holdings in 1945
and a detailed estimate of sales in that year,
There were questions about production and sales in
1944. LORD KEYNES gave the following ustimates for
1944 but said that it should not be inferred that the
samo position would hold good in 1945, especially as
regards gold receipts from South Africa.
(in millions of pounds sterling).
Receipts
Sales
S.Africo
79.5
Swedon
13.2
W.Africa
4.8
Switzerland 11.8
Bolgian Congo
2.1
Spain
1.2
Other
6.0
Iran
6.8
USSR
4.8
M.East
6.2
Total
97.2
Norway
1.3
Bolivia
4.7
Total
45.2
In answer to questions LORD KEYNES said that
Australian gold production wes petering out and that
in 1944 she would take a million pounds more gold
than she sold. He said that thanks to debt repatriation
South africa had sold gold to the U.K. in excess of
amounts required to finance the trade balance, but
that it was doubtful whether this would hold good
in 1945. The figures which he had quoted were
exclusive of Indian transactions, where the U.K.
sold on its own account 46 millions in pounds
sterling in 1944 and had advanced gold for sale on
U.S. account against part repayment in gold and part
repayment in dollars.
-3-
Regraded Unclassified
(c) Dollar Payments to Third Countries.
MR. COE asked whether the balance given in
paragraph 14 of Annex "A" involved double counting
of items like oil and sugar payments here and under
imports in the balance of payments statement. LORD
KEYNES said that this was possible, and that he
would check the position.
(d) Troop Pay.
MR. WHITE said that in his opinion the estimated
receipts form U.S. troop pay in the U.K. ($60 millions)
had been put at somewhat too low a figure, especially
if the German war continued well on into 1945.
On the other hand, he thought that the estimates
for the Storling area of the same item, namely
$200 millions, were too high, although it appeared
possible that sufficient account had not been taken
of U.S. navel exponditure in Australia. LORD KEYNES
said that the U.K. would welcome any additional
information which could be given about these two
estimates,
(e) Gold and Dollar Liabilities.
MR. WHITE asked for information about the gold
and dollar liabilities which were always shown
as a deduction from the gross reserves. LORD KEYNES
said details were being obtained from London and
would be communicated as soon as possible. MR. WHITE
asked whether the registered dollars would be likely
to be drawn on in 1945. LORD KEYNES said that this
was likely to happen as U.S. troops left an area: it
was already happening in Australia. He also said
that he did not look for any increase of such balances
by American banks when trade was increased.
MR. WHITE asked whether it was not the case that
the Portuguese balances were only payable in gold
five years after the war. LORD KEYNES said that
was the case.
5. EMERGENCY HOUSES.
LORD KEYNES asked whether the U.S. representatives,
without commiting themselves, could give an indication as to
whether the U.K. proposals under this head were likely to be
sympathetically received. If so, London would like to send out
an expert mission to deal with the technical questions involved.
LR. CURRIE said that FEA. was still considering the question.
No decision had been made but the initial reaction of the U.S.
representatives had been that the proposal was certainly worth
careful consideration. MR. TAFT said that there might conceivably
be supply difficulties as regards timber, and he advised the U.K.
representatives to get into touch with Mr. Earl Draper of F.H.A.
LORD KEYNES said that he was gratified by che initial reception
given to the U.K. proposals and that he would advise London to
send over the proposed mission.
Washington D.C.
22nd. November 1944
-4-
Regraded Unclassified
CCLL
u.S.No.32
Receiver
283
TOP SECRET
CCPY NO. 20
LFND LEASE IN STAGE II.
Further Particulars of Australia's Requirements.
Attached below are tables (1) giving further particulars of
the original Australian requirements which were submitted in the amp-
lified version of Chapter 4; and (2) some more information relating to
the additional items (specified in the Australian memorandum of 1st
November) which might be brought under lend lease if the civilian and
capital goods rules could be relaxed.
(Sgd.) A.W. SNELLING.
Washington, D.C.
4th November, 1944.
Regraded
Unclassifie
284
AUSTRALIA: QUANTITATIVE ANALYSIS OF REQUIREMENTS.
(All figures ($000)
5th Lend-Lease Estimate
1st Year Stago II
Thousands Dollars)
Item
$000
$000
$000
$000
No.
Description
Unit
Quantity
Value
Total
Unit
Quantity
Value
Total
Romarks
Food
1.
Tobacco - Leaf
lbs.
8,930,000
4,465
lbs.
6,236,000
3,100
Military requirements only. An
additional 81 million dollars
required for civilian purposes.
2.
Tobacco - Native Twist
L/T
290
487
L/T
348
900
Used for payment of native porters
in forward battle areas,
3.
Fish - Canned
Cases
294,600
3,252
Cases
239,500
2,000
For requirement of armed forces
48/1
48/1
only. Civilian use prohibited.
4.
Secds - Vegetable
Lbs
2,303,300
659
Lbs.
2,303,300
600
Australian food programme for
alliod forces,
5.
Seusago Casings - Artificial
Pcs.
894,400
81
Pcs.
1,188,800
100
Austrelian food programme for
allied forces,
6.
Coca Cola Concentrate & Misc
Var.
-
586
9,530
L/T
7,955
300
7,000
Coca Cola Concentrate in amount of
$275,000 entirely for U.S. Forces.
Raw Materials
7.
Timplate
S/T
156,800
18,816
S/T
116,667
14,000
95% for use in conning programme
ai
Metals - Carbon Steel
S/T
23,074.18
1,846
S/T
for allied forces.
15,000
1,200
Various industrial purposes
If
- Alloy Steel
S/T
6,027.58
1,506
S/T
4,000
1,000
directly connected with
10.
If
- Non-Ferrous
Var.
Ver.
7,787
Var.
Var.
800
munitions programme.
11,
Timber - Softwood
Var
Var,
415.6
M Bd.Ft.
56,400
2,400
Military and war production and
12.
#
- Hardwood
Bd.Ft.
2,351,522
231.5
M Bd. Ft.
1,900
1,400
construction - Civilian con-
13.
"
- Plywood
-
-
-
Var,
Var.
200
struction prohibited.
14.
Pulp
& Paper - Woodpulp
S/T
38,232
2,200
S/T
24,896
2,000
To augment Australian production
15.
=
If
- Fine Paper
S/T
29,250
5,144.6
S/T
16,092
3,500
which is inadequate for war
16.
#
If
-Wrapping Paper
S/T
7,434
2,378.8
S/T
5,331
1,800
purposes - paper usago all under
17.
"
#
- Sanitory and
strict and rigid control,
other Tissue
S/T
3,904
624
S/T
3,724
1,000
18,
"
n
- All other paper
-
-
-
S/T
696
700
19.
Raw Cotton
500#bales
30,000
3,750
500# bales
26,700
2,800
Military textiles, surgical
20. Raw Cotton Bleached Linters
-
-
-
S/T
356
200
dressings etc.
21. Synthetic Rubber - G.R.S.
-
-
-
S/T
9,000
6,000
Largely for use in military tire
programmos-supply under instructions
of Combined Boards.
Regraded Unclassified
285
5th Lend-Lease Estimate
1st Year Stage II
Item
$000
$000
,000
$000
No,
Description
Unit
Quantity
Value
Total
Unit
Quantity
Value
Total
Remarks
End Products (Cont'd)
42.
Medical Supplies - X-Ray
-
-
-
Var.
Var.
800
For use in Australian hospitals
43.
If
- Surgical
-
-
-
Var.
Var.
300
at the service of Allied
44.
If
- Drugs
-
-
-
Var.
Var.
1,100
forces.
45.
If
- Proprietary
-
-
-
Var.
Var.
200
46.
If
- Misc.
-
-
-
Var.
Var.
600
47. Textiles - Belting Duck
Lbs.
4,720,000
3,550
Lbs.
483,840
500
General industrial war production.
48.
e
- Tire Cord
Lbs.
10,000,000
5,500
Lbs.
9,800,000
9,500
Military tire programme.
49.
If
- Cotton Piece Goods
Sq.Yds
110,000,000
38,500
-
-
-
50.
Silver Bullion/Coinage
-
-
-
OZS.
19,000,000
5,000
Returnable in kind under special
agreement.
51.
Miscellancous - Film
Lin.Ft.
23,648,400
120
Lin.Ft.
27,800,000
200
Entertainment of armed forces.
52.
"
- Photographic
Each
700
138
Each
848
200
=
53.
"
- Business Machines
"
10,520
930
Var.
Var.
500
To be used directly by armed force
54.
"
- Hand Tools
Var.
Var.
2,409
Var.
Var.
2,000
General war production use.
55.
"
- Elec. Equipment
Var.
Var.
595
Var.
Var.
1,900
If
56.
"
- Industrial Eqpt.
Var.
Var.
737.7
80,693.7
Var.
Var.
1,200
44,000
#
RECAPITULATION
Food
9,530.0
7,000
Raw Materials
55,752.8
51,000
End Products
80,693.7
44,000
GRAND TOTAL
145,976.5
102,000
Commonwealth of Australia
War Supplies Procurement
November 3 1944.
Regraded Unclassified
286
5th Lond-Loase Estimate
lst Year Stage II
Item
$000
$000
$000
$000
No,
Description
Unit
Quantity
Value
Total
Unit
Quantity
Value
Total
Remarks
Raw Materials (Cont'd)
22.
Chemicals - Phosphate Rock
S/T
224,000
1,500
S/T
262,000
2,100
If
S/T
Required in connection with
23.
- Insecticidos
1,934.4
437
S/T
1,500
1,800
food programme.
24.
If
- Sulphur
S/T
49,280
748
S/T
36,000
500
25.
=
- Photographic
Lbs.
2,464,000
Required in munitions programme
840
Lbs.
1,765,000
600
26,
If
- Alcohols
U.S.Gals.
Req'd for indirect military uses.
35,955
36
Var.
Var.
600
Industrial alcohols required for
27.
"
- Chrome
-
L/T
munitions programme.
-
-
319
600
For tanning and textile industry -
producing direct military require-
ments.
28,
If
- Miscellanocus
Lbs.
36,020,000
3,000
Lbs.
21,200,000
1,800
29.
Miscellaneous -Abresive grains
Lbs.
4,480,000
600
Lbs. 3,520,000
600
General war production usage.
30.
"
- Carbon Black
Lbs.
17,684,000
1,061
Lbs.
13,440,000
1,200
Tire Programme.
31.
If
- Plastics
Lbs.
2,646,000
1,560
Lbs.
2,700,000
1,500
General War Production usage.
32.
If
- Miscellanoous
Var.
Var.
1,271.3
55,752.8
Ver.
Ver.
700
51,000
End Products
33. Automotive - Vehicles
Each
11,000
16,100
Each
8,900
7,000
Essential civilian wartime trans-
34.
é
- Spares
$
-
3,000
$
-
2,500
port and agricultural transport -
civilien gasoline rationing
5.
.
- Stationary Engines
Each
3,500
1,375
Ench
3,117
500
extromely rigid.
Required for incorporation in mo-
bile welding sets, pumping units,
etc, req'd by arméd forces.
Agricultural Implements
Req'd for food programme.
36.
- Whoel Tractors
Each
6,200
4,659
Each
6,200
4,900
37.
- Crewler Tractors
Each
200
300
Each
500
2,100
#
$
.
- Spares
$
920
1:100
38.
39.
10,489
658
Each
10,000
"
- All Other
Each
900
Each
-
500
40. Coal Mining Machinery(undergrcund)
-
-
-
$
-
41. Bearings
1,202
500
Required for maintenance of armed
$
-
services' equipment performed by
civilians. An additional
$1,000,000 required for general
industrial purposes related dir-
octly to the war effort.
Regraded Unclassified
287
AUSTRALIA: FURTHER PARTICULARS OF THE AD-
DITIONAL ITEMS LISTED IN THE AUSTRALIAN MEMOR-
ANDUM OF 1st NOVEMBER, 1944.
$1,000
Item
Description
Unit
Quantitiy
Value
1.
Tobacco Leaf
Lbs.
17,000,000
8,600
2.
Seeds, Essential Oils
& Miscellaneous Food
Var.
Var.
1,500
3.
Wcodpulp
S/T
12,900
1,000
4.
Paper
S/T
8,900
2,400
5.
Raw Cotton
500 lb. bales
3,413
400
6.
Abrasive Grains
& Plastics
Var.
Var.
2,100
7.
Bearings
$
-
1,000
8.
Business Machines &
Office Equipment
Ea.
-
1,200
9.
Cotton Piece Goods
Sq.yd.
15,000,000
4,500
$22,700
Regraded Unclassified
CCLL
u.s. No. 31
Receive
288
TOP SECRET
COPY NO. 20
LEND-LEASE IN STAGE II
INDIA
Attached below are particulars of the Indian
requirements under Lend-Lease in Stage II itemized in greater
detail than in previous submissions and giving quantities as
well as values wherever possible.
(Signed) A.W. Snelling
Washington, D.C.
4th November, 1944.
Regraded Unclassified
280
(U.S,)
CONFIDENTIAL
November 2, 1944
(BR.) CONFIDENTIAL
Mission: INDIA SUPPLY
SUMMARY
ESTIMATES OF LEND-LEASE REQUIREMENTS DURING STAGE 2 (YEAR 1945)
Item
Fiscal
Value
No.
Code
DESCRIPTION
Unit
Quantity
($000)
END USE
240
Automotive
1,200
These estimates have been assembled
according to the "Standard List of Items for
610
Agricultural Products - Foodstuffs
3,000
1945 Non-Military Requirements of Lend-Lease
Countries," also known as "Fiscal Code."
620
Agricultural Products - Other than Foodstuffs
2,900
This was the code previously used for all
Lond-Lease Estimates. The form used is the
630
Machinery, Equipment, Materials and Supplies
40,700
same as that used for previous estimates,
with the exception of the heading.
640
Metals and Minerals
23,500
650
Chemicals
500
670
Textiles
1,200
680
Lumber Products
4,500
690
Not otherwise Classified
6,100
GRAND TOTAL
83,600
220
November 2,1944
(U.S.) CONFIDENTIAL
(BR.) CONFIDENTIAL
Category: 3
Mission : INDIA SUPPLY
ESTIMATES OF LEND LEASE REQUIREMENTS DURING STAGE 2 (YEAR 1945)
Item
Fiscal
Value
No,
Code
DESCRIPTION
Unit
Quantity
($000)
END USE
240
VEHICLES (OTHER THAN ORDNANCE)
This estimate falls within the agreed quota
of $30 per truck and $12 per automobile per
244
Miscellaneous Automotive Supplies
year. Distribution is controlled in India
under the motor Vehicles Spare Part Control
1
Spares For Civilsin and G.M. Vehicles
$
1000
Order. Release of these items is granted only
for use on & specific essential vehicle,
maintenance of which is permitted because,
though operated by civilians, it has been
classified as essential to the Har Effort.
Most of the vehicles so maintained are
ongaged in work which is actually part of the
Military offort such as road-building, making
of aerodromes, transport of materials,
ordnance factory supplies, etc.
2
Spark Pluga for Oil and Gas Engines
Each
280,000
200
For mintenance of power supply in
various essential war uses.
I
2
201
(U.S.) CONFIDENTIAL
November 2, 1944
(BR.) CONFIDENTIAL
Mission : INDIA SUPPLY
Category: 7
ESTIMATES OF LEND-LEASE REQUIREMENTS DURING STAGE 2 (YEAR 1945)
Value
Item
Fiscal
DESCRIPTION
Unit
Quantity
($000)
END USE
No.
Code
610
Agricultural Products - Foodstuffs
1,
Miscellaneous Foods for the India
Cantoon Stores
$
3000
The Indian Canteen services operate soley to
( The exact broakdoun of various
meet the need of the Allied armios within the
foods for cantoen stores has
borders of India. The cantoon service is under
not yet been received from
the control of the Quartermaster General in
India.)
India. All cantoon stores are issued by the
canteen services in accordance with a basic
scale determined by the military authorities.
Distribution is affected only through
installations under the control of the
Quartermaster General in India
-
620
Agricultural Products - Other than Foodstuffs
I
2.
623
Loaf Tobacco
L.T.
2450
2800
Required for incorporation with Indian
tobacco in the manufacture of cigarettes for
the armed forces.
3.
623
Pipe Tobacco
L.T.
94
100
For sale and distribution exclusively to
troops in India,
Regraded Unclassified
November 2, 1944
(U.S.)
CONFIDENTIAL
(BR.
CONFIDENTIAL
Mission : INDIA SUPPLY
Category 7
ESTIMATES OF LEND-LEASE REQUIREMENTS DURING STAGE 2 (YEAR 1945)
Item
Fiscal
Value
No.
Code
DESCRIPTION
Unit
Quantity
($000)
END USE
630
MACHINERY, EQUIPMENT, MATERIALS, AND
SUPPLIES
632
Tractors
Each
108
300
For use in reclaiming wood-infested land
and breaking new land for cultivation,
to help combat fomine in India.
634
Electric Control & Suitchgear Spares
$
:
300
For maintenance of electric power and
lighting equipment in the service of the
war effort.
634
Fuse Cut-Outs
Each
46,000
300
.
639
Battery Matorials
$
400
Required for the mfg. of Batteries in
India, Entire output controlled by Govt.
and will be allocated to the Military and
R.A.F. in proportion of 50% and 40%, 10%
only for civilian use.
639
Lighting Carbons
Each
4,000,000
100
End use of these has not yet boon
received from India.
639
Edison Batteries
Ench
9,000
200
For battery-oporated eloctric machines,
639
Renovals for Primary Colls
Each
93,000
900
systems, and locomotives in essential
639
Primary Batteries (wct)
Each
55,000
800
use.
636
Locomotivos and Hngona
30,000
Referred back by U.S. War Dopt. for inclusion
Broad-Gaugo Locomotives
Each
60
in non-munitions program.
Moter-Gauge Locomotives
Each
128
Broad-Gaugo Wagons
Ench
6,000
Moter-Gauge Nagons
Each
1,717
Regraded Unclassifie
223
(U.S.) CONFIDENTIAL
Novomber 2, 1944.
(BR. ) CONFIDENTIAL
Mission 1 INDIA SUPPLY
Category: 7
ESTIMATES OF LEND-LEASE REQUIREMENTS DURING STAGE 2 (YEAR 1945)
Item
Fiscal
Value
No.
Code
DESCRIPTION
Unit
Quantity
($000)
END USE
639
Glass Bulbs for Electric Lamp Bulbs
manufacture
Each
9,000,000
200
= brief summary of the Lamp position in India
is BB follows:
Approx. annual consumption of Goneral -18,000,000
639
Eloctric Lamp Bulbs, General Service sizes
Lighting Lamps, based on survey in 1940.
ranging from 15 to 1000 watts
Each
9,000,000
1600
Local production (maximin capacity,
not. yot roachod).
- 9,000,000
Balance to be imported from overseas
End uso is:
- 9,000,000
Military against demand already received - 11%
Factories and Mills - - - - - 28%
Public Works Dopt. of Govt. of India - - 2%
Railways
-
-
-
- 5%
Ordnance Factories
-
-
-
- 5%
Provincial Govt. and Elec. undertakings - 25%
Havy
.
-
-
- 18
Civil user under control - - - - - 23%
639
Electric Lamp Bulbs, Ministure
Each
2,000,000
500
For flashlights, automobile Inmps, etc. in
casential use.
Regraded Unclass
(U.S.) CONFIDENTIAL
November 2, 1944
(BR. ) CONFIDENTIAL
Mission: INDIA SUPPLY
Category: 7
ESTIMATES OF LEND-LEASE REQUIREMENTS DURING STAGE 2 (YEAR 1945)
Item
Fiscal
Value
No.
Code
DESCRIPTION
Unit
Quantity
($000)
END USE
639
Spares for Receivers, Radio
$
200
Justification not yet received
639
Radio Set Tubes
Each
258,000
500
from India.
639
Typowriters, Standard and Portable
Each
12,000
1,000
For use by military, Government, and
essential war industries only.
639
Cutting Tools
Each
214,000
900
For use in ordnance factories,
639
Woodworking Tools
L.Tons
140
200
shipyards, railway shops,
639
Files and Rasps
$
:
300
and other essential war
639
Spares for Pnoumatic Tools
$
--
200
industries.
639
Machinory, Equipment
Materials and Supplies
$
--
1,800
For war industry.
- Miscellaneous
Regraded Unclassified
285
(U.S.) CONFIDENTIAL
November 2, 1944
(BR. ) CONFIDEMTIAL
Mission: INDIA SUPPLY
Category 7
ESTIMATES OF LEND-LEASE REQUIREMENTS DURING STAGE 2 (YEAR 1945)
Item
Fiscal
Value
No.
Code
DESCRIPTION
Unit
Quantity
($000)
END USE
640
Metals and Minerals
641
Steel
1.
Tinplate
L.T.
28,000
3,400
Includes (a) wire rope for collieries,
2.
Billets
L.T.
40,000
1,400
shipping operations, railways, harbours, etc;
3.
Rails and accessorios
L.T.
78,000
4,400
(b) mill rolls for steel rolling mills; boiler
4.
Hoops and strip
L.T.
11,000
1,100
tubes, rails, wheels, tyres and axles for rail-
5.
Tubes
L.T.
5,000
600
ways; (c) tinplate for foods and medicines for
6.
Wheels, tyros & axles
L.T.
32,000
5,700
the armed forces; (d) bolts and nuts for use in
7.
Bolts and nuts
L.T.
6,500
1,000
munitions production, ship repair, construction
8.
Tool steel
L.T.
1,300
2,300
of rolling stock, military vehicles, army
9.
Rolls
L.T.
5,000
1,000
bridges, docks, etc. (e) hoop and strip for
10.
Rope
L.T.
6,800
2,300
baling juto, cotton etc.
648
Other Motals and Minorals
11.
Ferro-Molybdenum
L.T.
107
100
For use in the menufacture of Mill Rolls and
High-Speed Tool Stools.
12.
Chrome Magnesito
Bricks and shapes
L.T.
380
200
These are required for use in the production
of Stool. 99% of materials asked for are
required by Steel Industries in India for nain-
tenance of furnaces. The refractories asked
for are not produced in India and no suitable
substitutos have yet been found from
indigonous sources.
Regraded Unclassified
226
(U.S.) CONFIDENTIAL
November 2, 1944
(BR. ) CONFIDENTIAL
Category 7
Mission: INDIA SUPPLY
ESTIMATES OF LEND-LEASE REQUIREMENTS DUR.ING STAGE 2 (YEAR 1945)
Item
Fiscal
Value
No.
Code
DESCRIPTION
Unit
Quantity
($000)
END USE
650
CHEMICALS
Sulphur
L.T.
24,000
500
Required for production of Sulphuric Acid
for War Industry.
I
(NOTE: Other chomicals would be included in the following groups:
639 Battery Materials
690 Tyre and Rubber manufacturing Materials)
Regraded Unclassified
(U.S.) CONFIDENTIAL
November 2, 1944.
(BR. ) CONFIDENTIAL
Mission: INDIA SUPPLY
Category: 7
ESTIMATES OF LEND-LEASE REQUIRIMENTS DURING STAGE 2 (YEAR 1945)
Item
Fiscal
Value
No.
Code
DESCRIPTION
Unit
Quantity
($000)
END USE
670
TEXT ILES AND CLOTHING
Rayon and Nylon Fabric and Cord for Tyres
Long
900
1,200
For the manufacture of Aircraft tyres for the
tons
U.S.A.A.F. in India.
680
TIMBER PRODUCTS
1.
Orogon Pino
Long
25,000
900
For construction of harbor lighters and small
tons
craft and for ship repair generally.
2,
680
PAPER all types
Long
20,000
3,300
For use and distribution by the Government
6
tons
exclusively. India Government roquirements
have been increased 350% by war needs, and
rigid controls are placed on the use of
paper of any kind.
3.
680
Masonitc
Long
2,600
300
For construction of bodies and radio boxes for
tons
Military vehicles, combat and cargo vessels,
pontoons, instrument panels for aircraft, etc.
Regraded Unclassified
288
(U.S.) CONFIDENTIAL
November 2, 1944
(BR. ) CONFIDENTIAL
Mission: INDIA SUPPLY
Category: 7
ESTIMATES OF LEND-LEASE REQUIREMENTS DURING STAGE 2 (YEAR 1945)
Item
Fiscal
Value
No.
Code
DESCRIPTION
Unit
Quantity
($000)
END USE
690
ALL OTHER COMMODITIES AND ARTICLES NOT
OTHERWISE CLASSIFIED
690
Abrasives
L.tons
650
100
For the mfg. of grinding wheels used in
the making of rifles, machine guns, and other
ordnance.
690
Carbon Black
L.tons
7,000
100
Carbon Black cannot be produced in India. The
requirement will be used for the following
purposes, by the indicated percentages: Tyres,
(Motor, Cycle, and Aeroplane) 70%, Electrical
Cables 5%, Industrial Hose 5%, Railway Fittings
5%, Gas Masks 5%, Army Footwear 4%, Rubber
Fabrics 2% Ind. Sheet Packing 2$, Misc. Item 2%
690
Materials for the mfg. of tyres and
other rubber items
L.tons
6,000
5,500
For nfg. of military vehicle and aircraft tyres.
690
Mercuric Oxide, Red and Yellow
L.tons
19
100
Required for embodiment in Antifouling com-
position used for the underwater protection
from marine pests of steamers and transports.
690
Monolite Fast Red, G.N.S. No. 5
L.tons
39
200
Entirely for nfg. of paints and dyes for
-
military use.
690
Miscellaneous
$
--
100
Small quantities of various essential
10
materials.
.
Regraded Unclassified
AIR 15
299
BRITISH air COMMISSION
1785 MASSACHUSETTS AVENUE
WASHINGTON, D. C.
TELEPHONE HOBART 9000
PLEASE QUOTE
REFERENCE NO
With the compliments of British Air Commission
who enclose Monthly Report No.14 covering
Aircraft Flight Delivery as at October 31, 1944.
The Honourable Henry Morgenthau, Jr.
Secretary of the Treasury,
WASHINGTON, D.C.
November 4, 1944.
Regraded Unclassified
2
CONFIDENTIAL
LOCATIONS FILL BUILT OCEANIC FLIGHT CHARGE AIRCRAFT
(COVERING THROUGH 11. 1944)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(20)
(11)
(12)
FORTRESS
LIB.
HUDSON
VENT.
7. BOAT
VENT.
BOST.
BALT.
B2L
825
126
TRANSP. TOTAL
(BAC-L/L)
(RAC)
(BAC-L/L)
(BAC)
(BAG-L/L)
(L/L)
(L/L)
(L/L)
(L/L)
(L/L)
(L/L)
(L/L)
WITH LIMITE
145
96
(b)807
141
548
58
31.2
1
409
YYYY
8
(b)564
3973
MIDDLE EAST (a)
5
95
205
69 (f)1115
233
(8)420
na
2390
wast AFRICA (a)
22
4
x
AUSTRALIA
27
R
BOUTH AFRICA (a)
135
107
45
207
SINGAPORE
9
,
INDIA (a)
395
305
900
AZORES
3
,
PREMIONS
91
n
OTU'S IN GANADA
210
68
64,
53
56
30
479
REAF
28
1
2
(d) 15
1
47
111 OTH
"
R
115
45 CROSP RAFTC
11
43
13
11
11
I
5
102
la reste overseas
2
37
9
1
17
66
Goose, 1 cte.
1
2
8
11
5
29
Fassen or Berunda (ea reste)
1
4
1
1
7
Special daty in Canada
1
2
1
1
1
2
8
Nontreal
50
24
12
20
106
CRASHED AFTER EXPORT
52
19
10
9
18
w
6
13
14
11
192
Is reute export
2
2
6
,
19
At Modification Center
6
1
109
116
h reute Modification Conter
3
3
Special daty in U.S.
2
2
CRASHED IN v.s.
1
28
6
1
3
15
5
2
21
1
73
DIVERTED TO U.S.
50
21
(a)2500
391
TOTAL
149
165
13/8
we
(g)660
46
458
(f)1176
1375
6077
(0)616 04211
8773
(a) Including deliveries to Rabat, Acera or Tobaredi for these destinations.
(b) Including 3 reason from British charge end treaterred to British 1. Ind. Airways, Ltd.
(e) Including 15 returned under Req. BSC 41018 after use by U.S.A.A.F. for training,
with 45 off D4-152 also under 41018 after A.A.F. training use. All 60 are included in Col. 6.
(d) later re-allecated to Canada by M.A.C. (Air), under Req. CA-00076.
(e) Refused w 21 75H's, 35 PEN's, ml 25 PR2Y-38's, returned to U.S. Navy.
PLANNING AND AIRFRAME SUPPLY
(f) Including 72 resered free British charge and transferred to Turkey.
BRITISH AIR COMMISSION
(g) Including 1 removed from British charge and treasferred to Turkey.
D.C.
(b) Including 3 removed from British charge el treaterred to Notherlands.
" 1944
3
e Reduced by cas which crashed at plant and was arreneously considered a diversion.
Regraded Unclassified
301
MF-262
London
This telegram must be
paraphrased before being
Dated November 4, 1944
communicated to anyone
other than a Government
Rec'd 9:26 p.m.
Agency. (CECRET 0)
Secretary of State
Washington
7355, November 4, 10 p.m.
FOR WRB FROM MCCLELLAND
Permission for entry into Switzerland for 155
Sephardic Jews mentioned last paragraph your 3702 was
obtained from Swiss Federal Police some weeks ago by
Saly Mayer.
(Department's 3702, October 30.) Problem is how
to get them out of Bergen Beisen. Swiss would welcome
formal request from Spanish Government concerning this
group as this might permit Swiss to specifically raise
question of their departure with Germans.
HARRISON
JT
Regraded Unclassified
302
AMT-352
Paris
Dated November 4, 1944
Rec'd 2:01 p.m., 5th.
Secretary of State,
Washington.
322, November 4, 5 p.m.
FROM J. JEFROYKIN AMERICAN JOINT DISTRIBUTION
COMMITTEE PARIS TO MOSES A. LEAVITT JDC NEW YORK
Yours October 16.
Hicum possesses only 2-1/2 million francs
representing emigrants deposits to be reimbursed to
owners. For this reason and other reasons we have no
interest to use it for relief purposes. View present
critical situation please send funds urgently account
Jules Jefroykin Credit Lyonnais Agence A. G. 2
Avenue Messine Paris.` American joint account will
function same bank from December 1.
CAFFERY
WFS
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Akzin, Cohn,
Pehle, Files.
Drury's DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack,
Regraded Unclassified
303
AIRGRAM SENT
AIRGRAM SENT
A=288
Nov. 4. 1944
2:15 P.M.
American Embassy.
Asuncion.
On October 2, Embassy at Madrid reported that Spanish
Government had as yet received no recuest fhat Paraguayan
Government through the Spanish Legation Paraguay regarding
visit to camps.
Please discuss matter with the Foreign Office with
a view to clarifying this matter.
Stettinius
Acting
AC
840.48 Refugees/10-244
Swp:HCE/SKL:TAH
11/1/44
Regraded Unclassified
304
CABLE TO AMERICAN CONSULATE, JERUSALEM, FROM WAR REFUGEE BOARD.
Please deliver the following message to Meilech Neustadt, Yahuda Halevi 40,
Tel Aviv, from David Wertheim of the Poale Zion Organization:
QUOTE REPLYING YOURS 23rd KUBOWITZKI INFORMS INNERQUOTE CONCERNING
SLOVAKIA SUGGEST THEIR COLLEAGUES HERE JOINT DEMARCHE APOSTOLIC DELEGATE
NEUTRAL DIPLOMATS BRATISLAVA AND ASKED MASARYK NEGOTIATE EXCHANGE INTERNED
JEWS FOR GERMAN CIVILIANS HELD PARTISANS. FOR HUNGARY REQUESTED APOSTOLIC
DELEGATE HAVE ALL CHURCHES DECLARED SANCTUARIES FOR JEWS, EIRE SEND
SPECIAL REDCROSS MISSION TO BUDAPEST ACT ALONG LINES SWEDISH MISSION.
CABLED CHAIRMAN ICRC AND PRINCE KARL STOCKHOLM ASKING APPEAL TO AND
WARN CHAIRMAN GERMAN REDCROSS. SWEDISH CONGRESS COMMITTEE NOW ACTIVE
IN 93 METRIC TONS FOODPARCEL SCHEME FOR CONCENTRATION CAMPS. End INNER*
QUOTE. WISE WILL ENDEAWOR EXPEDITE JARBLUM MATTER. UNQUOTE
10:30 a.m.
November 4, 1944
Miss Chauacey (for the Sec'y) Abrahamson, Ackermann, Cohn, DuBois,
Friedman, Hodel, Lesser, Mannon, McCormack, Files.
RDrury 11-3-14
Regraded Unclassified
305
CABLE TO MINISTER JOHNSON, STOCKHOLM, FOR OLSEN, FROM WAR REFUGEE BOARD.
Please deliver the following message to Laura Margelis, Hotel
Continental, Stockholm, from Joseph Schwarts of the American Jewish
Joint Distribution Committee:
QUOTE ANSWERING YOUR CABLE CONNECTION 115 FINNISH STATELESS
REFUGEES APPROVED TOTAL $20,000 AGAINST WHICH REMITTED $15,000
NOW REMITTING BALANCE $5,000 UNDER LICENSE NUMBER 642081-R.
BEHALF DANISH REFUGEES FIRST $85,000 REMITTED OCTOBER 11, 1943
ADDITIONAL $25,000 TRANSFERRED DECEMBER 29. $1,000 MONTHLY
APPLICABLE GENERAL BUDGET. SUGGEST YOU CONSULT IVER OLSEN
LICENSE 648481. WHILE HUGO ROTHENBERG WAS HEDPFUL TO US IN
PAST VIEW HIS PRESENT STATUS AS REFUGEE BELIEVE IT WOULD BE
BEST NOT HAVE HIM CLOSELY IDENTIFIED OUR WORK. PLAN RETURN
LISBON ENROUTE LONDON EARLY NEXT WEEK, UNQUOTE
THIS IS WRB STOCKHOLM CABLE NO. 235,
10:30 a,m,
November 4, 1944
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Cohn, DuBeis,
Friedman, Hedel, Lesser, Mannon, McCormack, Files.
RDrury 11/3/44
Regraded Unclassified
306
CABLE TO MINISTER JOHNSON, STOCKHOLMY FOR OLSEN, FROM WAR REFUGEE BOARD.
The War Refugee Board requests that the following message be
transmitted to Mr. Fritz Hollander, Congress Committee, Postbox 7306,
Stockholm, from Dr. Kubowitzki, World Jewish Congress:
QUOTE Thanks your message 30/10 will advise you next days.
Kindly have foodparcels forwarded following Bergenbelsen inmates:
Hans, Lotte and Susi Andorn, Rosa Berger, Izak Lina and Franciszka
Birnbaum, Benno and Dorothea Both, Henry and Rebecca van Esso,
Robert and Louisjacobi Helbing, Goldo and Uridan Kohn, Max and
Dora Lauinger, Blumegross Liebermann and daughter, Kurt Herta and
Evi Neumann, Claire, Martin, Jacques and Ralph Perlberger, Dora,
Felicia Maryannorbert and Hendrykjozef Reich. UNQUOTE
THIS IS WRB STOCKHOLM CABLE NO. 236.
1:45 p.m.
November 4, 1944
Regraded Unclassified
307
November 4g 1944
Midnight
AMLEGATION
STOCKHOLM
2224
The cable below for Olsen is WRB 233.
Reference your 4432, October 31 and terminology "unassimilated
persons in concentration camps." The Geneva Convention on Prisoners
of War has, by agreements between certain powers, been applied to
civilian nationals detained by the energy and who are said to be
thereby assimilated to the status of prisoners of war thereby
obtaining the same rights and privileges as military prisoners of
war. Such civilians 80 held in special civilian interrment camps
are reported through Intercross to countries of their nationality
and are accorded rights and privileges described in the convention
such as despatch and receipt of mail, receipt of food parcels and
clothing and visits by Intercorss delegates. Persons detained by
energy governments in concentration camps such as Belsenbergen,
Westerbruck and Krakaw are not covered by these agreements and
therefore are commonly referred to as "unassimilated persons."
It 1s toothle category of detained persons that the Board's parcel
program, 93 ton program from Sweden and similar undertaldings are
directed in keeping with Berle-Foot agreement authorizing programs
of this nature.
Please convey Board's appreciation to Whisler for his work in
restoring our parcels for forwarding.
STETTINIUS
(Acting)
WRBalMV:kg
SWP
NOE
11/3/44
Visa Chauncey (for the Sec'y) Abrahamson, Ackermann, Aksin, Cohn, Drury,
Files. DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack, Pehle,
Regraded Unclassified
308
ORIGINAL TEXT OF TELEGRAM SENT
FROM:
Secretary of State, Washington
TO:
American Legation, Bern
DATE:
November 45 1944
NUMBER:
3769
SECRET
To Minister Harrison and McClelland.
Reference is made to your 7163 of October 28. Department
and B oard fully agree with action suggested by Graseli. Should
you not yet have done so, you are requested to approach Swiss
authorities accordingly without delay. In connection with
claimants to citizenship of United States and other American
Republics, whether with or without documents, reference is made
to Department's 1269 of April 13, 1921 of June 6, and 2149 of
June 24.
This is WRB Born cable No. 258.
STETTINIUS
Acting
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Akain, Com,
Drury, DuBois, Friedman, Gaston, Hodel, Leaser, Maries, Marmon,
McCormack, Pehle, Files.
Regraded Unclassified
309
GEK-79
Bern
This telegram must be
paraphrased before being
Dated November 4, 1944
communicated to anyone
other than a Government
Rec'd 1:30 p.m.
Agency. (SECRET 0)
Secretary of State,
Washington.
7323, November 4, 9 a.m.
FOR WRB FROM MCCLELLAND
Information concerning Elchanon Wassermann is not
authemtic. Our search for these personalities which
began long age has remained unsuccessful.
According last information Rabbi of Neutra
hidden somewhere in Slovakia. See Legation's 7324 today
for balance this message which is for Union Orthodox
Rabbis from Stermbuch.
HARRISON
LMS
Regraded Unclassified
310
GEE-113
Bern
Dated November 4g 1944
Rec'd 2:33 p.m.
Secretary of State,
Washington.
7324, November 4, 10 a.m.
Griffel cables that Restadrut Poalim (Zionist
Labor Party) arranged with Sochnut for large scale
emigration from Rumania and has already purchased
steamer. If imigration is to depend on Hestadrut
and Sochnut it will handicap chances of unaffiliated
and Orthodox. Petrusca and colleagues warn that
collaboration with Sochnut is a dangerous precedent
as Sochnut considers emigration as an aliyah rather
than as rescue work. About one million dollars will
be necessary to carry out rational emigration plan.
Advisable purchase steamers as chartering apparently
expensive, although both can be done. Urgent action
necessary as it is confidentally understood danger
all certificates issued may be annulled. Also
necessary separate all assistance to Orthodox in
countries where hostilities have ceased to avoid
profanizing religion and anti-religious propaganda
among children aliyahs. For rescue work in Bulgaria
propose Rabbi Daniel Zion in Sofia and for Creece,
Rabbi Barsilay at Athens, Assume program our organization
includes these countries.
Griffel also requests $70,000 purchase steamer
for Rumanian emigration.
Petrusca closed contract for 500 departures from
Rumania to Turkey; further 1,000 will follow. He
requests 100,000 Swiss francs for each 300 departures.
Our French delegate forwarded urgent appeal of
Rabbi Soil at Aix Les Bains for 6,000 Subss france
necessary support for three months 100 children living
under wretched physical and spiritual conditions with
French peasants. Please wire instructions.
HARRISON
JT
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Alcein, Cohn,
Drury, DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mennon,
McCormack, Pehle, Files.
Regraded Unclassified
311
AMT-372
PLAIN
Barn
Dated November 4, 1944
Rec'd 3:05 p.m., 5th.
Secretary of State,
Washington.
7334, Fourth.
FOR WRB FROM MC CLELLAND
For Leavitt of Joint Distribution Committee from
Saly Mayer.
"Would you kindly cable me what Joe Schwartzs
plans are." 505
HARRISON
RR
lliss Chauncey (for the Sec'y) Abrahamson, Ackermann, Akzin, Cohn,
Drury, DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon,
McCormack, Pehle, Files.
Regraded Unclassified
PARAPHRASE OF TELEGRAM RECEIVED
312
FROM:
American Legation, Bern
TO:
Secretary of State, Washington
DATED:
November 4, 1944
NUMBER:
7344
SECRET
The following is from Riegner for Kubowitski of World Jowish
Congress. From McClelland for WRB.
on the basis of report received from Swiss Legation, ICRC
transmitted following information to us in confidence with regard to situation
of Jews in Budapest.
1. Hungarian officials recognized Swiss protection papers.
2. Recognition was not accorded Swedish protection papers.
3. Deportation was not made of male Jewish population; they
were sent for outside work on fortification.
4. It is said this measure is general, applying to non-Jews
also.
5. In Budapest, Jewish invalids, old persons, women and
children have been left in their houses.
6. Foodstuffs and clothing for category 5 have been requested
urgently from ICRC.
You are requested to telegraph if you are inclined to take part
in such relief and what quantity you have on harld.
HARRISON
DCR:GPW
11-10-44
Miss Chauncey (for the Sec'y) Abrahamson, Ackermann, Akain, Cohn, Drury,
DuBois, Friedman, Gaston, Hodel, Lesser, Marks, Mannon, McCormack, Pehle,
Files.
Regraded Unclassified
3-3
BAS-269
Bern
This telegram must be
paraphrased before being
Dated November 4, 1944
comminicated to anyone
other than a Government
Rec'd 9:42 p.m.
Agency. (SECRET 0)
Secretary of State,
Washington.
7347, November 4, 8 p.m.
FOR WRB FROM MCCLELLAND.
Department's 3657, October 26 and 3729, October 31.
As stated in Legation's 6837 October 13, Krier
and Clement have gone to Luxemburg for indefinite
period and I have no reliable irregular or regular
means of communicating with them. I shall attempt however
received details from them as to specific relief
needs in Luxemburg from which these funds could be
profitably used also possible channels of relief if
any for Luxemburg deportees labor and otherwise in
Germany.
To my knowledge neither Krier nor Clement have de-
velopea any plans for using either Dutch or Belgian funds
at present here in enemy territory. They are primarily
interested in relief for their own country.
lie are attempting secure information from Oldenbruck
in London whether equivalent of $90,000 was ever made
available to labor groups in Holland (Department's 3655,
October 26). If so will pay Dutch Minister here as instructed.
On November 1, I received 213,336 Swiss francs net from
Queen Wilhelmina fund through Swiss National Bank.
As it is exceedingly difficult it not largely impossible
to spend money already in hand in accordance with terms of original
license and in absence of other instructions 1 strongly recommend
that no (repeat no) further remittances from any of these three
organisations should be made to Bern as money is merely ao-
cumulating in bank and serving no useful purpose apparent to me.
HARRISON
AFS
Regraded Unclassified
314
Ankara
Dated November 4, 1944
Rec'd 4:15 p.m., 5th
Secretary of State
Washington
2114, November 4, 3 p.m.
FROM KATZKI TO PEHLE WAR REFUGEE BOARD
ANKARA'S NO. 177
For your information on November 3 a group of
80 persons proceeding to Palestine arrived in
/
Istanbul by rail from Bulgaria. They insisted 24
men who escaped to Sofia from the Bor mines
Yugoslavia, 50 children under the "children's
scheme" and 6 adults escorts for the children. It
is planned that they depart for Palestine during the
next few days.
STEINHARDT
WMB
Regraded Unclassified
315
SECRET
COPY NO
4
NOT TO BE RE-TRANSMITTED
OPTEL NoA 358
Information received up to 10 A.N. 4th November 1944.
1, NAVAL
On lst/2nd. Motor Torpedo Boats met EL force of two trawlers
four LCT's and three E-Boats off HOOK OF HOLLAND: one trawler
believed sunk.
2. MILITARY
Western Front 7th U.S. Army has made further local
gains VOSGNES sector on 25 mile front. J.K.
and U.S. Forces continue to advance slowly south of DEURNE _nd
are now within one mile of MEIJEL. North of BREDA we have
secured three bridgeheads over DINTEL M.RK C.NAL. South of
SCHELDT all German resistance now ceased; north bank we hold
coast line WALCHEREN ISLAND from DOMBURG to FLUSHING and have
captured all coastal positions and guns commanding Estuary.
ANT ERP appronches thus free from interference and minesweeping
has started. During 2nd/3rd, sucessful assault crossing made
two miles south of the causeway to WALCHEREN ISLAND; troops
from this bridgehead are moving northwest.
Eastern Front Between TISZA and DANUBE, mussions have
now advanced to within 12 miles of BUDAPEST.
3. AIR OPERATIONS
Western Front 2nd/3rd, DUSSELLORF. 4,473 tons induding
501 4,000 lb. bombs and 704 tons incendiary;
clear weather with good visibility -nd very good results; one
particularly impressive explosion reported; considerable fighter
opposition, five jet-propelled and two other aircraft claimed
destroyed. 20 Mosquitoes successfully sttacked 21 trains.
3rd. 145 medium bombers attacked roilway bridges
WESTERN GERMANY with unobserved results, 866 fighters and
fighter bombers (11 missing) operated over battle area,
wight were sent to HERFORD, 8 miles Northeast BIELFELD. All
3rd/4th. 53 Mosquitoes attacked BERLIN through cloud;
returned safely.
Mediterranean weather. 2nd. Operations severely restricted by
3rd. 47 Heavy combers made light sttacks by Pathfinder
technique on objectives SOUTHERN GERM.NY and AUSTRIA.
Regraded Unclassified