208 ORGANIZING SCIENTIFIC RESEARCH FOR WAR 



that advance payments should be made only after careful scrutiny to deter- 

 mine that they would promote the national interest. 



Normally OSRD contracts did not provide for advance payments but in 

 unusual cases when the contractor could justify the need and after he had 

 furnished an acceptable current balance sheet, provision for advance pay- 

 ment was made upon the favorable recommendation of the OSRD technical 

 representative. In a number of instances academic contractors were unable 

 to finance OSRD contract operations since their funds derived from foun- 

 dations, grants, state appropriations, etc., were not available for such use, 

 and in a few cases other nonprofit organizations were restricted by charter 

 from using their funds to finance Government contract operations pending 

 receipt of reimbursements. 



Advance payments were restricted to a monthly basis. OSRD technical 

 representatives were given an opportunity to make recommendations on all 

 advance payment vouchers submitted by contractors. This gave them a 

 chance to pass upon the necessity for and reasonableness of each month's 

 estimated expenditures and assisted generally in effecting a satisfactory con- 

 trol of the situation. Technical representatives were authorized to question 

 any apparently unreasonable or unnecessary items included in advance pay- 

 ment requests and to recommend approval of lower amounts. Various 

 administrative requirements designed to protect the integrity of advance 

 payments were included in the Contract Manual {Fiscal), copies of which 

 were furnished to contractors. 



At the peak of operations advance payments were being made under 

 fifty-six different contracts to twenty-one contractors and approximated 

 $10,000,000 per month. The advances were later supported by vouchers 

 showing the usually required detail. As fast as the detailed supporting 

 vouchers were received, the outstanding unsupported balances of advances 

 were liquidated. 



Indirect Costs 



As pointed out in an earlier chapter, NDRC adopted as its guiding prin- 

 ciple that research under its contracts should be conducted on a policy of 

 "no-profit-no-loss," and further that full costs should be paid. The standard 

 contract form listed a number of items as directly reimbursable, but it was 

 recognized that there is a substantial indirect cost of a going concern which 

 must be allocated as a part of the cost of a particular operation. NDRC 

 sought to approximate this indirect cost by an allowance for "overhead," 

 which initially was 50 per cent of labor costs in the case of nonprofit institu- 

 tions and 100 per cent of labor in the case of profit establishments. 



Desiring to find out how this rule of thumb was working in practice, 

 Conant, in August 1941, appointed a committee of disinterested individuals 



