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Thursday, 28 August 1941

Senator CAMERON (Victoria) . - 1 rise to direct attention to what I regard as a matter of paramount importance, namely, the disturbed state of certain sections of industry. I do so because every day anti-Labour newspapers, which have their own axes to grind, criticize workers who are associated with industrial disputes. On very few occasions do we find a newspaper making a sincere effort to establish any relationship between cause and effect. Most critics assume - it is a convenient assumption - that persons who are associated with industrial disputes are always wrong, and that those who condemn them are invariably right. That attitude merely aggravates the position and does not in any way ameliorate conditions or remove the causes of unrest. Therefore, it is incumbent on those who think differently, and desire that there shall be industrial peace throughout the country, to use their best endeavours to direct attention to the facts. One of the causes of industrial unrest is the cost-plus profit system under which many contracts are let. In the Economic Monograph No. 19, issued by the New South Wales Branch of the Economic Society of Australia and New Zealand, that system is described as follows : -

This type of contract is designed to meet conditions where there has been no experience of production. Originally it was designed for munitions annexes, on specialized work, and 4 per cent, is paid on allowable expenses. These include direct costs of labour and material plus allowable overhead expenses which are attributable to the contract.

The cost-plus system has been in operation for a considerable time. Dealing with this system a leading article in the Sydney Morning Herald of the 21st August contained the following statement : -

It is important that. " cost-plus " payments should be replaced by some more satisfactory form of contract, providing a direct incentive to economy. Even though the great majority of manufacturers have no desire to profiteer, no way should be left open for the unscrupulous few. It should be made the direct interest of contractors to economize and improve their methods, so that the need for Government .policing can be reduced to a minimum. The pressure against rising costs must; ite unrelenting in thi* time of enormously expanding Government expenditure. otherwise the result may well .be rising prices instead of rising output. Economy can he achieved only through the constant" vigilance of the men in charge of production, and they are in danger of losing sight of the importance of this factor when the services are clamouring for deliveries.' Economy i3 in the interest not merely of the taxpayer, but of output. Now that war-time scarcities are being felt, .production will lag if there in waste of materials or of skill in the factories, and too much of such wastage is already taking place

The article continues -

There can, of course, be no thought of a return to the tender system.

Thus, no less an authority than the Sydney Morning Herald condemns the cost-plus system and also the tender system. The Government knows what is taking place, and should realize that the time has now arrived when it should endeavour to organize and introduce another system under which much better results could be obtained. The moral effect on the workers of the cost-plus system can be well imagined. In every industry employees of all kinds work for fixed wages. Out of their fixed wage they have to meet rising prices and provide against 'breaks in the continuity of their work. They know that, under the cost-plus system, contractors are allowed to add to their cost a proportion of profit, and that it has been suggested - and they have good reason to believe correctly - that, in many instances, their costs are heavily loaded. In addition to loaded costs, contractors operating under the cost-plus system are allowed overhead expenses. The impression in the minds of the workers is nhat those firms operating under tho cost-plus system can fix their return at almost any rate they think fit or that they believe will be allowed.

Senator McBride - That is not correct and the honorable senator knows it.

Senator CAMERON - The Government has yet to prove that it is not correct. I have the best of reasons for believing that the Government is prepared to allow very liberal overhead charges. A contractor may say, "My services are worth £20 a week " when, as a matter of fact, they may not be worth as much as these of the average tradesman under his supervision.

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