The department had certain purchasing practices. If a new type of production were required, the practice in many cases was to fix a target price; that is, to allow the contractor to make a certain number of units and then make a firm price contract based on those units with a renegotiation clause. Usually those contracts called for a ceiling price of perhaps three, four or five per cent of cost. Then there were lump-sum contracts based on yearly production. Before these contracts can be settled it is necessary to audit the accounts over the years and to renegotiate the price according to what is indicated.
Subtopic: ESTABLISHMENT OF DEPARTMENT TO ASSUME FUNCTIONS OF RECONSTRUCTION AND MUNITIONS AND SUPPLY