July 3 — The long-deferred legislation by Congress to provide for settlement of war contract terminations will become effective July 21, 20 days from the date when it was signed by President Roosevelt on July 1.
This important measure provides the basis for settlement of many billions of dollars in contracts now or to be outstanding, and is intended to facilitate prompt action by the Government contracting agencies. It is of great importance to banks, since it protects their loans and enables the contractors to protect their working capital through the interim period between the cancellations of their contracts and full and final settlements of their claims against the Government agencies.
The Act signed by the President is entitled the "Contract Settlement Act of 1944," and was Senate Bill No. 1718, with such amendments as were approved in compromise between the two Houses of Congress.
Director to Head Settlement Board
Major features of the Act include these:
Creation of a Contract Settlement Board headed by a Director to be appointed by the President and confirmed by the Senate to serve for two years at a salary of $12,000, the Director to have authority to appoint an assistant if necessary.
Agreements between the war contractors and the contracting agencies shall be final, but, if the contractors are aggrieved, they can appeal to an appeals board or, as an alternative, bring suit against the Government in the Court of Claims or any United States District Court.
Contract settlements are made independent of the Office of Comptroller-General except in cases in which he believes fraud is involved.
Direct payments by the Government to subcontractors are authorized.
Payments are to be made to war contractors within 30 days after they file termination applications, and on the basis of 100% of the value of completed products, and 90% of the estimated value of inventories and costs incurred.
Government property to be removed from war production plants within 90 days.
War Contracts Clears Way For New "T" Type of Loans
The Act also is construed as clearing the way for the issuance of regulations for a new "T" loan to assure that funds are made available to contractors whose contracts have been completely terminated. This regulation is reported to have been substantially prepared by the Government contracting agencies.
