The Army and Economic Mobilization

By R. Elberton Smith | Go to book overview

CHAPTER XXVII
Contract Termination: Background and Preparations

Nature and Implications of Contract Termination

During World War II the Army canceled thousands of its procurement contracts because of reductions in estimated requirements, obsolescence of particular items, more important demands upon a contractor's facilities, and for other reasons.1 Beginning with a mere handful of cancellations prior to Pearl Harbor, terminations began to assume importance in 1942. In the summer of 1943, when procurement deliveries attained peak rates, there was a rapid increase in cancellations, and by the fall of 1944--with the approach of victory in Europe--the problem of widespread terminations had become a major concern of the War Department. Toward the end of 1944 the sudden increase in requirements associated with the Battle of the Bulge caused a substantial decline in the number of terminations. But shortly thereafter, from the collapse of German resistance in the spring of 1945 until V-J Day, contract termination and its associated problems became the number one item of business for all the procurement agencies as well as for the entire business community. Before V-J Day arrived, the War Department had canceled 59,000 of its ultimately terminated 135,000 World War II prime contracts. On V-J Day alone 48,000 contracts were terminated, and during the following year the War Department continued to be actively engaged in liquidating its tremendous war procurement program.2

Contract termination and its associated procedures represented the core of the process of Army materiel demobilization. This process may be summed up as the resolution of three broad groups of problems: (1) problems connected with the decision to terminate contracts; (2) problems dealing with the settlement of terminated contracts; (3) problems involving the disposition of war

____________________
1
The termination of a war contract (not to be confused with contract completion) involves the cancellation of all remaining work under the contract at some stage prior to completion.
2
Two valuable studies of contract termination in World War II are: (1) Office of Contract Settlement, A History of War Contract Terminations and Settlements ( July 1947), 84 pp. including 19 pages of bibliography (hereafter cited as OCS, History). This was prepared by Reynold Bennett, later of the Legal Office, OCofOrd. (2) "War Contract Termination", Law and Contemporary Problems, X, No. 3 (Winter 1944), 427-560, and No. 4 (Spring 1944), 561-696. This study was published by the Duke University School of Law and consists of a dozen articles on the subject written by actual participants in the termination problem at the time of the drafting and passage of the Contract Settlement Act. The principal article in the series is the richly documented "Policies and Procedures for the Termination of War Contracts", pp. 449-517, by Leon Malman, then chief of the Legal Unit, Contract Termination Section, Ocoford.

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