FISCAL AFFAIRS 205 



After having inquired into the facts of several such cases, he had concluded 

 that the point was well taken. Thus, unlike contracts involving normal 

 research or development work, an OSRD contract calling for a substantial 

 amount of straight shop, manufacturing or construction work required the 

 use of personnel and facilities upon which commercial organizations usually 

 relied for their profits. Use of those facilities on OSRD contracts prevented 

 their use on more profitable war orders already on their books. Further- 

 more, the shop work under some OSRD contracts was similar to the work 

 then being done in the contractors' shops for the armed services on a profit 

 basis. In such cases, the necessities of the situation, the public interest in 

 starting the work as quickly as possible and equitable treatment of the 

 prospective OSRD contractor required that the contract be executed on a 

 reasonable profit basis. The amount of profit was not to exceed 7 per cent 

 of the estimated cost, exclusive of profit. Contract Standard Form 1002 (See 

 Appendix 3) was adopted for use in the relatively few cases where a profit 

 was to be allowed. 



General Considerations 



In the early days of NDRC all fiscal functions were performed by Central 

 Administrative Services (CAS) of the Office for Emergency Management. 

 For its routine operations it was necessary for NDRC to maintain some 

 fiscal records duplicating those maintained by CAS. The need for speed 

 which was inherent in NDRC and OSRD functions was incompatible with 

 the maintenance of fiscal control by another agency overloaded with work 

 of other offices and at a different location. Gradually, one function after 

 another was transferred from CAS to OSRD, and by November i, 1944, 

 the last of the CAS fiscal functions relating to OSRD had been transferred 

 to OSRD. 



There were few precedents for the type of operation OSRD was con- 

 ducting. The entire program was built around the central idea that certain 

 research and development work was urgently needed; that the best results 

 could be obtained by leaving the scientist as free as possible to conduct that 

 research; and that some method of fiscal control must be found which would 

 protect the public interest in the proper expenditure of funds without un- 

 duly infringing upon the primary objective of the research program. In 

 establishing its fiscal procedures OSRD worked closely with the Bureau 

 of the Budget and the General Accounting Office with the hope of estab- 

 lishing those procedures upon a solid foundation. 



As will appear from the text printed in Appendix 2 the standard form 

 contract contained a list of expenditures which were reimbursable as direct 

 costs. One clause covered items specifically certified by the Contracting 

 OfiScer as constituting a necessary part of the cost of the subject work. It 



