What is Appropriate Public Policy for Profit Renegotiation?

by Sumner Marcus



It has come to he assumed that some form of renegotiation is inevitable during a period of national emergency. At the same time, the advocacy of renegotiation as the best way to curb defense profits has always been accompanied by the recognition that renegotiation is a displeasing technique with many drawbacks and one that would not and should not be used for very long. The article explores how well renegotiation is suited to cope with the defense profits problems of the 1960s in the U.S., and assuming that renegotiation is to be continued, what improvements should be made in it. The objectives of renegotiation, price reduction and the prevention of windfall profits, do not in 1959 lend the same cogency to arguments for the continuation of renegotiation as they did in 1942. This is because of the many significant developments of the intervening period, and particularly the fact that defense purchasing has become relatively less important to the economy. It has been viewed that the renegotiators do some thing essentially different from those engaged in making contracts for the government and have thereby acquired special skills which are worth retaining. Only a thorough investigation of present contracting organizations and procedures of the government can tell whether this is so. Obviously, it, is not possible

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