One of the most controversial features of procurement operations in World War II was the widely used cost-plus-a-fixed-fee form of contract.1 Army commitments under all types of CPFF contract for that war exceeded $50 billion and amounted to nearly one third of all Army purchases. The nature and implications of the CPFF contract were widely misunderstood throughout the war, partly because of the complexities of the pricing problem and partly because of general ignorance of the many specific types of CPFF contract and the procedures set up for their administration and control. A review of the War Department's experience with CPFF contracts reveals the heart of the problem of contracting and pricing for wartime procurement and prorides the foundation for an understanding of all wartime pricing methods, renegotiation activities, contract administration, and other facets of the total procurement problem.
The CPFF form of contract had been used in World War I but received far less publicity than the cost-plus-a-percentage- of-cost type of contract, which subsequently became the target of much investigation and criticism. World War I experience had revealed the extravagance and waste resulting from CPPC contracts, which rewarded producers in direct proportion to the money they spent in performing their contracts. Moreover, all cost-plus forms of contract came under heavy suspicion because they failed to provide a firm ceiling upon costs or expenditures. A fairly common sentiment in Congress and elsewhere on the eve of World War II might be summed up in the words: "Why not make the contractor quote a reasonable price and hold him to it?" fortunately, this prescription shed no light on how its laudable objectives were to be obtained, and neither the Congress, the War Department, nor any other authority was able to provide a formula which could. Accordingly, although the CPPC form of contract was outlawed from the beginning of the defense period, the CPFF contract was--upon recommendation by the War and Navy Departments--specifically authorized and permitted throughout the war.
There were many reasons why the Army in the defense and war periods could not have accomplished its procurement mission in the absence of various types of "cost" contract. The equipment and supplies required by the Army for World War II consisted mainly of items which were either completely new or required drastic changes in design and specifications in order to meet the standards and possibilities of modern technological warfare. This was true not____________________