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Wednesday, 29 April 1942

Mr MAKIN - Honorable members will recollect that on the 5th March, in reply to a question by the honorable member for Dalley (Mr. Rosevear), I undertook to make a detailed statement regarding excess profits made by contractors in respect of the use of machine tools hired by them from the Commonwealth. I hari already announced that the methods of determining the costs under the system had been revised, that it was no longer possible for excess profits to arise, bm that past payments had still to be examined in order that adjustments, if any, should be determined. Investigations, consequently, have been directed to a number of contractors in New South Wales, Victoria, and South Australia, in order to determine whether there have been undue profits, as alleged. These investigations are not yet complete, but the results so far support the contention that some contractors have made excessive profits, and that this condition of affairs profit through the utilization of junior labour, whereas the rate of payment was based on the assumption that adult labour would be used. The investigations disclose that whilst four firms in New South Wales and South Australia have obtained excessive profits under the machine-hour rate as compared with the standard costplus conditions, three firms working extensively under the machine-hour rate in Victoria have charged a negligible percentage more than they might have claimed under the standard cost-plus conditions. The details are as follows : -

Upon completion of these investigations claims will be formulated for refunds from those contractors who are considered to have made excessive profits. As stated, the trouble arose from the fact that, whereas the machine-hour rate was fixed upon the assumption that adult labour would .be employed - and many of the manufacturers did use adult labour - some manufacturers were enterprising enough to discover that junior labour could be employed upon what was generally accepted to be the function of skilled labour. The mistake was that they did not realize that what might be accepted as business acumen in peace-time became indefensible when it arose from the dire need of the community in war-time. The revised machine-hour rate now being applied for small manufacturers of tools and gauges should be effective in preventing a recurrence of excessive charges. Recently, the machine-hour rate was amended to provide that the amount allowed as a part of the cost of the manufacture of small tools and gauges should not exceed the rent payable. In practice it was found impracticable to apply this rule, owing to variations of time worked in successive weeks. It is now considered that the most effective method of obviating the possibility that a contractor might make a profit on the rental of machine tools hired to him for the production of small tools and gauges would be to reduce the rent to a nominal amount and to allow nothing in costs for use of the machine tools. This will reduce the cost of small tools and gauges, and simplify the determination of the price to be paid.

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