Page:Legislative History of the AAF and USAF.djvu/27

 �This Page Declassified lAW EO12958 Force end supplemental appropriation bill for 1941 to allow 12 per cent profit on aircraft. General Arnold testified before the Senate Appropriations Committee in favor of the 12 per cent limitation (rather than one of 7 or 8 per cent). The appropriation act was approved 9 September 1940 without chang- 1rig the profit hmitation prowsions,  short time later tlus problem was permantly solved by the passage of Sectran 401 of the Second Revenue Act of 1940, approved 8 October 1940, which removed all profit lnni- tation provions on Army and Navy air- craft contracts. This act also contained provisions allowing liberal amortization deductions for tax purposes of the cost of defene plant facilities. These deductions were based on high depreciation allowances for the period of emergency which had been proclaimed by President Roosevelt as g9nn;mg on !0 June 1940. The emergency was to enc only when the President pro- claimed that the utilization of a substantml portion of the nation's emergency facilities was no longer needed for naonal defense. This was calculated to reassure contractors who would ordinarily fear to incur the great capital outlays invotved in building and equipping expensive war plants only to find themselves wth an unsalable "white ele- phant" on their hands If the emergency should end before the plants paid for them- selves. 7 The authority to split awards granted by Public Law 426, 76 Cong, 2 Seas. (approved õ March I940) and the authority to nego- tiate contracts granted by Public Law 703, 76 Cong., 2 Seas. (approved 2 July 1940), tended only to 30 June 1941. Th regular military establishment appropriation bill for 1942 provided the necessary extensmn of those authorities for the fical year 1942 B giving aircraft mamLfacturers great incentives to accept government contracts, and by streamlining the process of letting contracts, the above leglslation had the desired effect of speeding procurement. An- other device which helped to speed up air- craft deliveries was the use of "letter con- tracts" by the Air Corps. Ttns practice permitted a saving of from one to three months in the fabrication of aircraft by arranging advance agreements which ena. bled manufacturers to secure the necessary materials and start tooling-up for produc- tion while they waited for a formal con- tract to be drawn up and sgned. Because of long and intnnate assomahon with the aircraft industry, the Air Corps could ue these direct contacts to e. dvantage An ex- pehtmg aircraft production and procure. ment, and could also profit greatly from the legislation passed by Congress to pedite production and facilitate procure- ment. These measures were greatty needed by the American aircraft industry which had been given the tremendous job of expand- ing its production capacity from a normal capacity of some 2,000 planes a year to more than 4,000 a month. The effectiveness of these legrelative measures and the ac lion taken to implement them was indicated by the fact that aircraft production in 1940 showed an increase of 250 per cent over the previous year. By the end oi Sep- tember 1940 there were contract oustand ing for 16,649 Army aircraft. Although the deIiveries to the Air Corps were stilt behind schedule in 1941, the total of military air- craft accepted by all users in that year was I9,428 as compared with a total of only 3,770 accepted by all users in the second half of 1940. As there was an increasing trend toward heavy bomber types, there was also a marked ncrease in the average weight per plane as well as a numerical gain. Although the Air Corps' share of air- craft deliveries wa far too small to equip its authorized 54 groups, prospects for the future were encouraging. " During the prewar period of Air Corps expansion, 1939-41, Congress enacted other legAslation which had a close relation to the production and procurement of aircraft materlel. The most important measures were the Stockpiling Act, the "Pipeline Act," the "Cash and Carry Act," the "Lend- Lease Act" and the various acts providing for aeronautreal research and development and appropriating funds to be used in this work. The "Cash and Carry Act" and the "Lend-Lease Act" had such broad signifi- THIS PAGE Declassified lAW EO12958