GOVERNMENT: Profit Motive Restored

The Navy last week went a long way in recognizing the importance of keeping the profit motive at work to promote economical war production.

From now on, said the Navy, it will abandon cost-plus-fixed-fee contracts (in which the contractor is guaranteed a profit no matter what his costs) and return to competitive bidding and fixed-price contracts (in which the cheaper a manufacturer produces a product the more profit he will make).

Reasons for abandoning fixed-price contracts at the beginning of the war were the necessity for getting out big orders fast, and lack of knowledge of how to price swarms of...

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