the last day) after the mailing under section 105 (a) of the notice of such order,

or

(b) if the case was not conducted initially by the Board itself-within ninety days (not counting Sunday or a legal holiday in the District of Columbia as the last day) after the mailing under section 107 (e) of the notice of the decision of the Board not to review the case or the notice of the order of the Board determining the amount of excessive profits,

file a petition with The Tax Court of the United States for a redetermination thereof. Upon such filing such court shall exclusive jurisdiction, by order, to finally determine the amount, if any, of such excessive profits received or accrued by the contractor or subcontractor, and such determination shall not be reviewed or redetermined by any court or agency. The court may determine as the amount of excessive profits an amount either less than, equal to, or greater than that determined by the Board. A proceeding before the Tax Court to finally determine the amount, if any, of excessive profits shall not be treated as a proceeding to review the determination of the Board, but shall be treated as a proceeding de novo. For the purposes of this section the court shall have the same powers and duties, insofar as applicable in respect of the contractor, the subcontractor, the Board, and the Secretary, and in respect of the attendance of witnesses and the production of papers, notice of hearings, hearings before divisions, review by the Tax Court of decisions of divisions, stenographic reporting, and reports of proceedings, as such court has under sections 1110, 1111, 1113, 1114, 1115 (a), 1116, 1117 (a), 1118, 1120, and 1121 of the Internal Revenue Code in the case of a proceeding to redetermine a deficiency. In the case of any witness for the Board, the fees and mileage, and the expenses of taking any deposition shall be paid out of appropriations of the Board available for that purpose, and in the case of any other witnesses shall be paid, subject to rules prescribed by the court, by the party at whose instance the witness appears or the deposition is taken. The filing of a petition under this section shall operate to stay the execution of the order of the Board under subsection (b) of section 105 if within five days after the filing of the petition the petitioner files with the Tax Court a good and sufficient bond, approved by such court, in such amount as may be fixed by the court. Any amount collected by the United States under an order of the Board in excess of the amount found to be due under a determination of excessive profits by the Tax Court shall be refunded to the contractor or subcontractor with interest thereon at the rate of 6 per centum per annum from the date of collection by the United States to the date of refund.

SEC. 109. RULES AND REGULATIONS.

The Board may make such rules, regulations, and orders as it deems necessary or appropriate to carry out the provisions of this title.

SEC. 110. COMPLIANCE WITH REGULATIONS, ETC.

No person shall be held liable for damages or penalties for any act or failure to act resulting directly or indirectly from his compliance with a rule, regulation, or order issued pursuant to this title, notwithstanding that any such rule, regulation, or order shall thereafter be declared by judicial or other competent authority to be invalid.

SEC. 111. APPLICATION OF ADMINISTRATIVE PROCEDURE ACT.

The functions exercised under this title shall be excluded from the operation of the Administrative Procedure Act (60 Stat. 237) except as to the requirements of section 3 thereof.

SEC. 112. APPROPRIATIONS.

There are hereby authorized to be appropriated such sums as may be necessary and appropriate for the carrying out of the provisions and purposes of this title. Funds made available for the purposes of this title may be allocated or transferred for any of the purposes of this title, with the approval of the Bureau of the Budget to any agency of the Government designated to assist in carrying out this title. Funds so allocated or transferred shall remain available for such period as may be specified in the Acts making such funds available.

SEC. 113. PROSECUTION OF CLAIMS AGAINST UNITED STATES BY FORMER PERSONNEL. Nothing in title 18, United States Code, sections 281 and 283, or in section 190 of the Revised Statutes (U. S. C., title 5, sec. 99) shall be deemed to prevent any person by reason of service prior to January 1, 1954, in performance of duties or functions required by this Act, from acting as counsel, agent, or attorney for prosecuting any claim against the United States: Provided, That such person shall not prosecute any claim against the United States (1) involving any subject

matter directly connected with which such person was so employed, or (2) during the period such person is engaged in employment in a department or the Board.

TITLE II-MISCELLANEOUS PROVISIONS

SEC. 201. FUNCTIONS UNDER WORLD WAR II RENEGOTIATION ACT.

(a) ABOLITION OF WAR CONTRACTS PRICE ADJUSTMENT BOARD.-The War Contracts Price Adjustment Board, created by the Renegotiation Act, is hereby abolished.

(b) TRANSFER OF FUNCTIONS IN GENERAL.-All powers, functions, and duties conferred upon the War Contracts Price Adjustment Board by the Renegotiation Act and not otherwise specifically dealt with in this section are transferred to the Renegotiation Board.

(c) AMENDMENT OF THE RENEGOTIATION ACT.-Subsection (a) (4) (D) of the Renegotiation Act is amended by inserting at the end thereof the following: "A net renegotiation rebate shall not be repaid unless a claim therefor has been filed with the Board on or before the date of its abolition, or unless a claim shall have been filed with the Administrator of General Services (i) on or before June 30, 1951, or (ii) within ninety days after the making of an agreement or the entry of an order under subsection (c) (1) determining the amount of excessive profits, whichever is later. A claim shall be deemed to have been filed when received by the Board or the Administrator, whether or not accompanied by a statement of the Commissioner of Internal Revenue showing the amortization deduction allowed for the renegotiated year upon the recomputation made pursuant to section 124 (d) of the Internal Revenue Code."

(d) TRANSFER OF CERTAIN FUNCTIONS.-All powers, functions, and duties conferred upon the War Contracts Price Adjustment Board by subsection (a) (4) (D) of the Renegotiation Act, subject to the amendment thereof by subsection (c) of this section, are hereby transferred to the Administrator of General Services. (e) FUNCTIONS AND RECORDS.-Each Secretary of a Department is authorized and directed to eliminate the excessive profits determined under all existing renegotiation agreements or orders by the methods enumerated in subsection (c) (2) of the Renegotiation Act in respect of all renegotiations conducted by his Department pursuant to delegations from the War Contracts Price Adjustment Board. The several Departments shall retain custody of the renegotiation case files covering renegotiations thus conducted for such time as the Secretary deems necessary for the purposes of this section, and thereafter they shall be made available to the Renegotiation Board for appropriate disposition. The renegotiation records of the War Contracts Price Adjustment Board shall become records of the Renegotiation Board on the effective date of this section.

(f) REFUNDS.-All refunds under subsection (a) (4) (D) of the Renegotiation Act (relating to the recomputation of the amortization deduction), all refunds under the last sentence of subsection (i) (3) of such Act (relating to excess inventories), and all amounts finally adjudged or determined to have been erroneously collected by the United States pursuant to a determination of excessive profits, with interest thereon in the last mentioned case at a rate not to exceed 4 per centum per annum as may be determined by the Administrator of General Services or his duly authorized representative computed to the date of certification to the Treasury Department for payment, shall be certified by the Administrator of General Services or his duly authorized representative to the Treasury Department for payment from such appropriations as may be available therefor: Provided, That such refunds shall be based solely on the certificate of the Administrator of General Services or his duly authorized representative.

(g) EXISTING POLICIES, PROCEDURES, ETC., TO REMAIN IN EFFECT.-All policies, procedures, directives, and delegations of authority prescribed or issued (1) by the War Contracts Price Adjustment Board, or (2) by any Secretary or other duly authorized officer of the Government, under the authority of the Renegotiation Act, in effect upon the effective date of this section and not inconsistent herewith, shall remain in full force and effect unless and until superseded, or except as they may be amended, under the authority of this section or any other appropriate authority. All functions, powers, and responsibilities transferred by this section shall be accompanied by the authority to issue appropriate regulations and procedures, or to modify existing procedures, in respect of such powers, functions, and responsibilities.

(h) SAVINGS PROVISION.-This section shall not be construed (1) to prohibit disbursements authorized by the War Contracts Price Adjustment Board and certified pursuant to its authority prior to the effective date of this section, (2) to affect the validity or finality of any agreement or order made or issued pursuant

to law by the War Contracts Price Adjustment Board or pursuant to delegations of authority from it, or (3) to prejudice or to abate any action taken or any right accruing or accrued, or any suit or proceeding had or commenced in any civil cause; but any court having on its docket a case to which the War Contracts Price Adjustment Board is a party, on motion or supplemental petition filed at any time within twelve months after the effective date of this section, showing a necessity for the survival of such suit, action, or other proceeding to obtain a determination of the questions involved, may allow the same to be maintained by or against the United States.

(i) RENEGOTIATION ACT NOT REPEALED.-Except as by this Act specifically amended or modified, all provisions of the Renegotiation Act shall remain in full force and effect.

(j) DEFINITIONS.-The terms which are defined in the Renegotiation Act shall, when used in this section, have the same meaning as when used in the Renegotiation Act, except that where a renegotiation function has been transferred by or pursuant to law the terms "Secretary" or "Secretaries" and "Department" or "Departments" shall be understood to refer to the successors in function to those officers or offices specifically named in the Renegotiation Act.

(k) EFFECTIVE DATE OF SECTION. This section shall take effect sixty days after the date of the enactment of this Act.

SEC. 202. PERIOD OF LIMITATIONS FOR RENEGOTIATION ACT OF 1948

No proceeding under the Renegotiation Act of 1948 to determine the amount of excessive profits for any fiscal year shall be commenced more than one year after the mandatory statement required by the regulations issued pursuant to such Act is filed with respect to such year, or more than six months after the date of the enactment of this title, whichever is the later, and if such proceeding is not so commenced (in the manner provided by the regulations prescribed pursuant to such Act), all liabilities of the contractor or subcontractor under such Act for excessive profits received or accrued during such fiscal year shall thereupon be discharged. If an agreement or order determining the amount of excessive profits under such Act is not made within two years following the commencement of the renegotiation proceeding, then upon the expiration of such two years all liabilities of the contractor or subcontractor for excessive profits with respect to which such proceeding was commenced shall thereupon be discharged, except that (1) such two-year period may be extended by mutual agreement, and (2) if within such two years such an order is duly issued pursuant to such Act, such two-year limitation shall not apply to the review of such order by any renegotiation board duly authorized to undertake such review.

SEC. 203. AMENDMENT OF SECTION 3806 OF THE INTERNAL REVENUE CODE

Section 3806 (a) (1) of the Internal Revenue Code is hereby amended by striking out subparagraphs (A), (B), and (C) and inserting in lieu thereof the following:

"(A) The term 'renegotiation' includes any transaction which is a renegotiation within the meaning of the Federal renegotiation act applicable to such transaction, any modification of one or more contracts with the United States or any agency thereof, and any agreement with the United States or any agency thereof in respect of one or more such contracts or subcontracts thereunder.

"(B) The term 'excessive profits' includes any amount which constitutes excessive profits within the meaning assigned to such term by the applicable Federal renegotiation act, any part of the contract price of a contract with the United States or any agency thereof, any part of the subcontract price of a subcontract under such a contract, and any profits derived from one or more such contracts or subcontracts.

"(C) The term 'subcontract' includes any purchase order or agreement which is a subcontract within the meaning assigned to such term by the applicable Federal renegotiation act.

"(D) The term 'Federal renegotiation act' includes section 403 of the Sixth Supplemental National Defense Appropriation Act (Public 528, 77th Cong., 2d Sess.), as amended or supplemented, the Renegotiation Act of 1948, as amended or supplemented, and the Renegotiation Act of 1951, as amended or supplemented."

SEC. 204. SEPARABILITY PROVISION

If any provision of this Act or the application of any provision to any person or circumstance is held invalid, the validity of the remainder of the Act and of the

application of its provisions to other persons and circumstances shall not be affected thereby.

Passed the House of Representatives January 23, 1951.

Attest:

RALPH R. ROBERTS, Clerk.

The CHAIRMAN. Mr. Roberts, we are pleased to hear you today on this matter. We would like for you to give us an analysis of this bill as compared with the old Renegotiation Act, as amended. We have a comparative print that is before each member of the committee. You might proceed and let us have a general survey of this subject.

STATEMENT OF FRANK L. ROBERTS, CHAIRMAN, MILITARY RENEGOTIATION POLICY AND REVIEW BOARD, OFFICE OF SECRETARY OF DEFENSE, ACCOMPANIED BY SUMNER MARCUS, COUNSEL, NAVY RENEGOTIATION DIVISION, ARMED SERVICES RENEGOTIATION BOARD, AND ASSOCIATE COUNSEL TO THE MILITARY RENEGOTIATION POLICY AND REVIEW BOARD, AND HOWARD W. FENSTERSTOCK, COUNSEL TO THE AIR FORCE DIVISION OF THE ARMED SERVICES RENEGOTIATION BOARD Mr. ROBERTS. Mr. Chairman and members, if I may, I would like to make the following statement, and I might say that any question that occurs to any member, or yourself, I will be glad to answer.

The CHAIRMAN. Interrupt during your statement, or after you have finished?

Mr. ROBERTS. During the statement.

The CHAIRMAN. Very well. You may proceed. We do not have a large number of the committee present, but the record will be here and we will be in session again on this matter Friday. So you may proceed, and your statement will be read by the members of the committee, of course, before we finally take any action.

Mr. ROBERTS. Thank you.

This bill, H. R. 1724, provides for the renegotiation of contracts, and for other purposes. It was passed by the House of Representatives by unanimous vote on January 23, 1951, after extensive hearings and consideration by the Committee on Ways and Means of that body.

In reporting the bill, the Committee on Ways and Means concluded that present procurement problems are substantially as great as those which brought about the enactment of similar legislation in World War II, and that the scope of the existing renegotiation law is not broad enough to insure the uniform and effective recapture on a fair and equitable basis of excessive profits which may be derived from the expanded defense effort.

World War II created problems of procurement and production unprecedented in scale and complexity. Renegotiation was devised as one means of meeting and overcoming some of these difficulties. The magnitude of this task, and the extent to which the renegotiation program succeded, are evidenced by the fact that contracts subject to renegotiation under the World War II statute aggregated in excess of $200,000,000,000 and that gross amounts of more than $11,000,000,000 were recaptured through renegotiation. If we assume that applicable

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tax rates would have resulted in the recovery of approximately 70 percent of this gross amount, the net recovery effected by renegotiation aggregated approximately $3,300,000,000.

The conditions of war production which made renegotiation necessary may be briefly stated.

The CHAIRMAN. You are still sticking to the old theory that you must renegotiate before taxes; is that right?

Mr. ROBERTS. Yes, sir, Mr. Chairman.

The CHAIRMAN. I had a great deal of difficulty with Mr. McIntosh and others under the old act. It always did seem to me that if you renegotiated after taxes, you could do it with a comparative handful of personnel, whereas you have got to have a very large staff doing it on the basis that this bill follows, and the old act, as well.

Mr. ROBERTS. Mr. Chairman, on that point, may I make this observation?

The CHAIRMAN. Yes, sir.

Mr. ROBERTS. I think there are things in this bill which provide for a different administration, and that there is no reason why the lessons learned in the administration of the former Renegotiation Act cannot serve to avoid the need for so many people.

The CHAIRMAN. I hope you can. While that is not primarily our responsibility, it is a direct responsibility on every committee of Congress, and the rapidity with which agencies are being built up now and the size of those agencies all over this country, is something staggering. When the whole picture is spread out before you, you can appreciate it. This is simply, of course, one of the agencies.

My recollection is that we were told, and I presume correctly informed and fully informed, that while renegotiation took place before taxes, nevertheless the ultimate tax liability was a factor that was always present in the minds of your organization, for instance. I simply call your attention to that. I know the theory on which this bill is built, just as the old act was. You may proceed.

Mr. ROBERTS. Yes, sir. And, if the theory is followed that it is an attempt to secure retroactively and on an over-all basis the proper price, then it must of necessity come before taxes. I believe that later on this point is more fully developed. If it is not, I will be very happy to go into it further.

The CHAIRMAN. Very well.

Mr. ROBERTS. War materials of all kinds were required in enormous quantities with the greatest possible speed. Many contractors were asked to produce articles which had never been produced before and which were subject to frequent change. Others were asked to produce articles which were new to them. Virtually all were asked to produce articles in amounts far beyond their previous experience. Quantities needed, rates of delivery, and specifications had often to be revised in the light of experience and the demands of war. Shortages of material, priorities, and allocations increased the uncertainty of production. New facilities had to be obtained; new personnel employed and trained to new methods; and new sources of supply developed.

Under these circumstances, contractors and contracting officers found themselves unable to make accurate forecasts of costs on which to base prices. In many cases the original contract prices proved far too high when tested by actual experience.