�This Page Declassified lAW EO12958 Air Force Leg=slal?o? ment procedures recommended by the War Department and the Air Corps. The act contained a provision allowing a 12 per cent profit (as opposed to a previously con- sidered 10 per cent ln'altation on profits) on all contracts for aircraft or portions thereof, and the time limit for making up losses or deficiency of profits was increased from one to four years. It was also provided that when aarcraft were purchased as a result of competative bids requiring the submission of sample aircraft the Secretary of War was authomzed to purchase one sample aircraft each lrom not more than three unsuccessful competitors2" In the interest of presetrang military se- curity Congress passed the act of July 1939, winch permatted the Cluef of the Axr Corps to purchase or have manufactured certain classified aircraft mater?el items without advertising lor Mds. It was pro- vided, however, that such secret orders must be authorized by the Secretary of War and submxtted to three reputable concerns ior their b?ds. ? Th?s law did not give the Air Corps wide latitude in security procedures but it d?d allow the protection of some of the plans and specifications of new types of aircraft matoriel now being produced ?or the Air Corps. By the enactment of Public Law 426, Cong., ?, Sees. (approved 5 March 1940), Congress granted w?der latxtude m aircraft procurement. By the terms of thin legisla- tion, Congress gave the Secretary of War the authority to choose the bidder whom he thought could best meet the require- ments when contracts were awarded on a basis of competitive bidding. If he felt it was warranted by the defense situation he could split the contract award among three b?dders. Such contracts were to be reported to Congress and were subject to rewew by the President and the Federal courtsJ ? Winle this act did not grant full authority for the negotiation of contracts, it dxd modiIy shghtly the existing stringent regu- lations and made it possible to spread some of the contracts among small producers who could not have received orders other- wise. It was an essential emergency measure which helped to speed up aircralt deliveries and to create greater p?oductive capacity The President's speech of 16 l?Iay 1940 called for enormous mereuses in roreraft production. As a consequence the nece?mty for conmdering the questions of profit tat?ons and negotiated contracts in relation to the procurement of aircraft and aircraft mater?el became greater. The Air Corps pointed out that negotiated contracts were essential to accomphsh the contemplated expansion program. The competitive d?ng system was entirely too time-consum- ing to use m the emergency procurement mtuation which existedJ ? The question of profit limitations was also one winch had to be settled ff the A?r Corps procurement program was to meet the expansion goals. Congress made limxta- tions on profits more stringent by enacting Public Law 671, 76 Cong., 2 Sees. (approved 28 June 1940), which allowed only 8 per cent profits. This law also prohibited the use of cost-plus-a-percentage.of?cost nego- tinted contracts, and limited to 7 per cent (of the total estimated cost of the con- tract) the fixed fee to be paid ?n cost-plus-a? f?xed-fee contracts. This leg?lation also gave Army contracts and orders priority over all deliveries ?or private account er ex- port 4? l?ublic Law 703, 76 Cong., 2 Sees. (approved 2 July 1940) gave the Secretary of War the same authorxty to negotiate con- tracts as the Secretary of the Navy had been given by Publm Law 671. He could negotaate cost-plus-a-fixed-fee contracts but cost-plus-a-percentage-of-cost contracts were prohibited. The same 8 per cent re- strmtmn was placed on profits which could be made on contractsJ ? Although the negotmted contract provi- sions of Public Laws 671 and 703 were con- sidered highly desirable, the War Depart? ment and the A?r Corps deplored the 8 per cent profit limitation. Accordmg to Gert. George II. Brett, Chief of the Matoriel Divi- sion, the prowsions of Public Law 671, 76 Cong., 2 Sees., limiting profits on a?rcraft to 8 per cent caused contracts for 4,000 planes to be scrapped. Congress moved to rectify this conchtxon, as far as the Air Corps was concerned, by amending the ?ec- THIS PAGE Declassified lAW EO12958
