FISCAL AFFAIRS 2O9 



to look into it and a number of other items of NDRC fiscal policy. The 

 committee consisted of Walter A. Jessup, President of the Carnegie Corpora- 

 tion of New York, Chairman; Alan Gregg of the Rockefeller Foundation, 

 and Elihu Root, Jr., prominent New York attorney. The Committee report 

 of December 1941, recommended that in the case of contracts for over 

 $35,000 a separate determination be made of the proper overhead charge 

 with reference to the conditions of particular contract and the department 

 and institution concerned. It was suggested that the recommendation as to 

 the proper overhead percentage might be made after consultations with 

 university comptrollers such as R. B. Stewart of Purdue, Lloyd W. Morey 

 of the University of Illinois, Robert M. Underbill of the University of Cali- 

 fornia, or Horace S. Ford of M.I.T. For smaller contracts the committee 

 recommended that the practice of fixing a flat overhead percentage be fol- 

 lowed, but with a review and a redetermination of the proper overhead for 

 contracts with any institution when the aggregate of its contracts reached 

 $150,000. There was a further recommendation that the base for computa- 

 tion of overhead be broadened to include all direct costs and that the over- 

 head percentage be lowered accordingly. 



Following the receipt of this report Bush asked the persons named in it 

 to visit various academic institutions having OSRD contracts to recommend 

 overhead allowances for those having total contracts in excess of $150,000. 

 In March 1942, after having visited the institutions and discussed overhead 

 costs with their presidents and other officials, these gentlemen made specific 

 recommendations for overhead percentages at the several institutions. They 

 also submitted a proposed plan of allowance for overhead costs on OSRD 

 contracts with educational institutions. The plan provided for the computa- 

 tion of overhead costs on a sliding scale starting with 50 per cent of salary 

 costs on the first $250,000 of OSRD contracts with any one institution, 45 

 per cent on the next $250,000, 40 per cent on the next $500,000, 35 per cent 

 on the next $1,000,000, and 30 per cent on all above $2,000,000. Special 

 consideration would be given to any off-campus project or any single con- 

 tract of $100,000 or more, and the exact percentage applicable to such 

 contracts should be determined on the basis of the conditions involved. 



This report was submitted for review to an expert accountant with no 

 university connections. He suggested generally that it would be preferable 

 for OSRD contracts with academic institutions to be written on a "provi- 

 sional price" basis and renegotiated after the completion of the work. This 

 plan was considered but not adopted. A modification of the overhead plan 

 seemed preferable to the complications which might follow the adoption of 

 a "provisional price" plan, especially in view of the opposition of con- 

 tractors revealed in tentative discussions. 



In the course of the discussions of overhead the suggestion was made 

 that the Comptroller General might rule the OSRD contract to be invalid 



