In the preceding chapter we have been discussing chiefly the written, formal contract, the tangible, visible document, duly signed and witnessed, which could be submitted to any court as prima-facie evidence of the obligations of both the producer and the Government. If, however, the impression has been given that all the war business was conducted under the authority of such instruments, let it now be dispelled; because thousands of manufacturers did war work for the Government, and the Government itself became involved for hundreds of millions of dollars, under another set of arrangements, which became known, after the armistice, as the informal, or “Bevo,” contracts. These agreements, while embodying the same terms as those of the formal contracts, were drawn with no such attention to the niceties of federal procedure, without which the law says that a government contract is not enforcible. The informal contracts were a product of the hurry and rush to get things done. There were several sorts of them, some being formal in type but defective in detail, others existing in written records, such as correspondence, but not in formal contracts, and still others being merely oral agreements between the producers and the agents of the Government as to what work had to be done.

The law, in theory, assumes that the Secretary of War himself makes and signs contracts for the production of army supplies. He is permitted by law, however, to delegate his contracting function to accredited deputies, who are called contracting officers. In normal times these contracting officers are able to make all the necessary contracts; but during the war, with all industry aligning itself in the munitions organization, it became physically impossible for the regular contracting officers to handle all the business, and they in turn appointed deputies or proxies, and conferred on them (quite illegally, as it afterwards appeared) the right to sign contracts. Then, in the urgency of the occasion, the procurement officers, who were frequently business men commissioned in the military service, adopted the common business expedient of allowing correspondence to stand as evidence of contractual engagements, expecting to follow up this correspondence with formal contracts when the ponderous executive machinery of the Department could get around to it. Sometimes the producer did not even have the protection of correspondence, but, after coming to an oral understanding with the contracting officer as to what was to be done and on what terms, hurried back to his factory to spend, it might be, hundreds of thousands of dollars in preparation for some large manufacturing effort, without a scrap of writing to secure him in these investments. Finally, there was an extensive class of contracts which lacked correct form. New officers, unfamiliar with the restrictions which hedge about the governmental administrative acts, restrictions which the public calls red tape, took the short cut of making out direct purchase orders, which stipulated quality, quantity, price, method of payment, time of delivery, and so on; and the producers accepted such orders in good faith as binding agreements.

All went well with this informal procedure until the armistice brought the necessity of terminating the war business. The question was, How might the oral and other informal contracts be settled? And then the Comptroller of the Treasury rendered the absolutely stunning decision that all these informal arrangements, including the formal contracts which had been signed by proxies of the constituted contracting officers, were illegal and without standing before the Treasury, and that not a penny of government money could be paid out in settlement of the obligations of the Government under the terms of these agreements, except that the Government could pay for goods actually delivered. At that time the outstanding contracts and agreements of all sorts involved the Government in the sum of approximately $7,500,000,000. The informal contracts, thus declared void, accounted for $1,500,000,000 of this sum. The Government, if it chose, could refuse to reimburse a dollar of hundreds of millions expended freely by patriotic manufacturers, careless of their own interests in their eagerness to give their utmost service to the prosecution of the war.

Of course, repudiation of these agreements was unthinkable, if only for the reason that such action would have brought on an unprecedented business panic and sent many concerns crashing down into bankruptcy. Yet the only remedy was legislation to permit the Government to settle up its obligations under these contracts just as if they had been properly drawn in the first place. Such legislation, known as the Dent Act, was eventually passed by Congress, the law being approved by the President on March 2, 1919. In the interim between the armistice and that date, the holders of informal and irregular contracts were subjected to an unavoidable injustice, the nature of which will be plain when we have somewhat examined the War Department’s method of terminating its war industry.

The modern contract is the foundation stone of industry and commerce. If the integrity of that foundation be impaired, we come into a condition of anarchy of which Anglo-Saxon civilization knows nothing. The man who breaches a contract can be held in court to indemnify the other party to it, and the Government itself cannot escape such liability. On the first day of the armistice there were 30,000 outstanding war department contracts. Three thousand of these, involving a government expenditure of over $1,500,000,000, either were so near completion or called for the production of materials so necessary to the maintenance of the demobilizing Army or for the future preparedness of the United States that they were allowed to go through undisturbed. The other 27,000 contracts bore a face value of $6,000,000,000. Under many of them there had been extensive deliveries of finished supplies to the Government, these deliveries (including the deliveries made while the industries were tapering off their production and adjusting themselves to peace conditions) amounting to approximately $2,000,000,000 in value. Thus there was left to the War Department a contractual obligation amounting to $4,000,000,000, which huge sum would go to pay for a great mass of materials for which the Government could have no possible use. It was highly desirable to terminate the unfulfilled portions of these contracts; yet few of the contracts contained termination clauses. It will be remembered that the standard termination clause did not appear as a common feature of the war contracts until the final six weeks of hostilities. Thus the majority of the 27,000 contractors possessed the plain legal right to go through with the performance of their contracts, even though the war had ended, and thereafter to hold the Government to the full payment of the face value of the contracts. The sum of such determination, had it been unanimous, would have cost the United States $4,000,000,000 with nothing to show for it except a great collection of useless munitions which could be sold to the junk dealers.

Upon the administration of the War Department rested the responsibility to save for the people as much of this sum as could be saved. Not all of it could be saved. Millions had been spent by the contractors for machinery and other equipment, for materials, and to pay manufacturing costs during the early stages of production. These millions the Government was bound to reimburse in any event, together with a reasonable profit upon work already done. The closer the administration could come to paying these legitimate costs and nothing else, the more successful would be its conduct of the industrial demobilization. The question was, what procedure to adopt.

To be sure, the departmental heads might have adopted the policy of canceling the contracts outright; but such a course would have meant ruin for many manufacturers, it would have thrown into the courts a mass of litigation that would have congested them for the next two generations, and it would have shattered the faith of business in the Government and rendered difficult all governmental contracting in the future. Instead of that, the war department heads adopted the shrewd measure of requesting the producers to suspend work on their contracts. They made termination a voluntary act on the part of the contractor. It is obvious that it was fully as much to the interest of the producers as to that of the Government to liquidate the war business amicably and, it may be said, inexpensively, since these very men would be the ones called upon to contribute most heavily in taxes to the payment of the war debt. Nevertheless, it was greatly to the credit of American business men that their response to the general request to terminate war contracts was nearly unanimous. There was scarcely one who stood on his full legal rights. The business of industrial demobilization was largely that of negotiating with the individual producers as to the terms under which they would consent to terminate their contracts. When the terms were adopted, they were written into the original contracts as supplemental agreements and thus given legal force. The decision which resulted in this procedure was one of the great administrative acts of the War Government. It saved billions of dollars to the Government and it sent the war producers away fairly well content with the treatment they had received.

The preliminary steps in industrial demobilization were taken before the armistice. For one thing, in those final days when it was apparent that the end was close at hand, the War Department adopted the policy of terminating the war contracts by agreement. For that purpose, the war department administration added to the standard contract provisions already adopted standard forms of supplemental agreements, to the end that the liquidation of war industry might be carried out uniformly. On November 9 all production bureaus of the Department were notified to be ready to enforce the termination clauses of contracts when the fighting ended. This order, of course, applied only to those contracts containing termination clauses; but at the same time provision was made for the suspension of war work when the public interest required it. This suspension was to be preliminary to the adoption of arrangements whereby war industry could be gradually stopped down and readjusted by easy stages. On this date, too, the Department adopted a policy from which it never afterwards deviated: not to pay to a producer any profits on prospective production under his contract, but to allow a profit as high as 10 per cent of the cost on work that had actually been done but from which no actual production might have resulted. Thus from the very first the Government showed a spirit of conciliation that promised well for the producers of war supplies.

On the morning of November 11, after the receipt of the official news of the armistice, the Secretary of War, the Secretary of the Navy, and the Director of the United States Shipping Board announced after a conference that all Sunday work and overtime work on government contracts would cease at once, and that war industry would be tapered off by the various procurement agencies in consultation with the Department of Labor and the War Industries Board. These two organizations, the one in contact with employers and the other with labor, were in a position to guard the interests both of labor and of industry. Meanwhile the procurement bureaus of the War Department, following the recent instructions, had sent out generally requests to suspend the manufacture of munitions. These orders were soon modified to allow production to continue at most of the war plants, but the brief interim of idleness gave the procurement officers time to survey the situation and also served as a notice to the manufacturers that the war was over and that they were to incur no further obligations in pursuance of their contracts.

Simultaneously with issuing the suspension requests, the procurement bureaus in Washington began making out what were known as termination schedules. These were detailed statements of proposed reductions in war work compiled by individual contracts, by manufacturing projects, by entire commodities that were being consumed by the Army, and by entire production programs. These schedules were first sent for approval to the Director of Purchase, Storage, and Traffic, who also secured the approval of the War Industries Board and the Department of Labor. The approved schedules were then sent back to the bureaus for action, except that the bureaus were instructed to terminate the production gradually so as not to disturb industry in any particular localities. The terminations, of course, were made by agreement with the producers, the agreements embodying the terms under which the manufacturing ceased.

So expeditiously was this work started that the first termination schedules reached the Director of Purchase, Storage, and Traffic on November 12, and the schedules poured in upon him every day thereafter. Within a few days the prepared schedules involved the termination of a billion dollars’ worth of work. Each schedule was the product of a comprehensive study of the industries affected, made by the production bureaus, which were in intimate touch with those industries. On December 5 the terminations and reductions reached a total of $2,500,000,000. A large part of the war industry had been reduced or terminated without serious detriment to the condition of business and employment. Consequently, it was decided that no such precautions as were being taken were longer necessary, and a change in the liquidation system went into effect. Thereafter the stoppage of war industry was placed entirely in the hands of the district production officers of the War Department. These men were to consult with the local officers of the Department of Labor as to the effect of terminations upon employment, and were also to make frequent regular reports to the Director of Purchase, Storage, and Traffic. For the rest, they were free to act according to their own best judgment.

The various supply bureaus were well organized to conduct the demobilization in this way. Before 1917 the bureaus had administered the production of supplies directly from their headquarters in Washington. After the war came, the volume of business grew beyond the capacity of such a system to handle it efficiently; and the principal production bureaus thereupon divided the country into manufacturing districts and placed district organizations, subsidiary to the bureau headquarters in Washington, in charge of them. The bureaus in Washington continued to execute contracts, but the work of superintending manufacture, inspecting products, and paying for supplies was placed in the hands of the district organizations. The Ordnance Department, for instance, established twelve manufacturing districts in the United States and one in Canada. The Director of Purchase, in charge of the production of quartermaster supplies, established fourteen such districts, which were called zones. The Air Service had eight districts and the Chemical Warfare Service four. All production for the Signal Corps, Engineers, Construction Division, and Medical Department was administered directly from Washington.

This decentralization of the field administration of war industry had a marked effect upon its efficiency. The administrative officers in charge of a manufacturing district were men of high standing in the business and industry of their respective regions. They knew the manufacturers in those regions. They were always right at the spot when difficulties arose in securing raw materials and fuel and shipping priorities. Even more important, each district organization had within it a representative of the Finance Service of the Army. The War Department was empowered to make advance payments on contracts up to a considerable percentage of the value of work done or supplies actually delivered. These advances, as we have said before, enabled the munitions producers to finance their projects. The district organizations, maintaining finance officers in the field as they did, enabled the producers to obtain these advances in a minimum of time.

Frequently the chief executive officers of the manufacturing districts were civilians. Each district board maintained a strong legal department and also numerous technical assistants, not the least among which were the cost accountants. Since a great portion of the war supplies were produced on the cost-plus plan, the war brought the cost accountant into great prominence, during both the period of production and the period of liquidation afterwards.

These district organizations, in immediate contact as they were with the producers, comprised an organization ready built for the delicate work of terminating war industry. Washington might fix policies and specify the classes of supplies the production of which was to be stopped and the sorts which were to be produced after the armistice in full or curtailed quantities. It was for the district administrations to say how the terminations and reductions should be carried out. Consequently, after the armistice the organizations in charge of the manufacturing districts were changed over into what were variously known as district claims boards and district boards of review. Whatever they were called by the bureaus creating them, their duties were essentially the same—to terminate contracts by mutual consent, to agree with the producers upon the terms of settlement, to take over in the name of the War Department such finished products, raw and semi-finished materials, machinery, buildings, and other equipment as became government property under the terms of the settlements, and to dispose of the materials thus taken over, some being selected for permanent retention among the nation’s war assets, some being turned over to other branches of the Government which could make use of them, and others being disposed of by sale. To assist it in this work, each district board maintained a subsidiary organization known as the district salvage board, which collected the government property and disposed of it.

To supervise this field activity, each procurement bureau of the War Department established at headquarters in Washington a superior board known as the bureau claims board. Each of these supervisory boards, in turn, created as an adjunct to itself a bureau salvage board, which maintained executive control over the district salvage boards. For several weeks there was no specific executive agency to direct the work of this organization, except that all the bureau and district boards were under the general authority of the Director of Purchase, Storage, and Traffic. He unified and controlled their work through what were known as supply circulars, a medium of administration which had come into great importance after the creation of the Division of Purchase, Storage, and Traffic. Through the supply circulars the administration of war industry issued its general and class directions to the production bureaus. The standard contract provisions, for instance, had been brought to the attention of the contracting officers by publication in the supply circulars. The series of supply circulars thus came to be the code of unified army supply.

The Director of Purchase, Storage, and Traffic, however, had many duties other than those of directing the demobilization, though none more important. It was realized that the system needed a controlling head, the sole function of which would be to administer the entire liquidation of war industry. Therefore, late in January, 1919, the Secretary of War created the War Department Claims Board, into which were to focus, through the bureau boards, all the field activities in industrial demobilization. The Assistant Secretary of War became the president of this board. Mr. G. H. Dorr, who was also the assistant Director of Munitions, and Brigadier General (later Major General) George W. Burr, who had succeeded General G. W. Goethals as Director of Purchase, Storage, and Traffic, were the first regular members of the War Department Claims Board. There were also three special members and a recorder, and as time went on the Board was expanded by the creation of subcommittees of experts in various legal and industrial subjects.

The process of liquidation, therefore, originated with the district boards. In settling with a contractor, the district board appraised all the articles completed under the contract. It examined the expenditures which the contractor had made and the obligations he had incurred looking toward the finished production. Under the demobilization policy adopted, the Government was responsible for both of these costs. It paid for completed supplies (the price including the contractor’s profit), for raw materials purchased for the contract but not used, for semi-finished materials, for the contractor’s obligations to his subcontractors (including the costs of canceling the subcontracts), and, finally, for all general operating costs, including the contractor’s “overhead” expenses, factory and machine depreciation costs, and the amortization of new facilities built at the Government’s behest. To the most important production costs (but not including depreciation or amortization costs or interest on money invested in materials) the claims boards were authorized to add 10 per cent of the sum as the contractor’s profit. The Government paid no prospective profits, but only a fair remuneration for work actually done.

This was the proposition extended to the manufacturer when the Government proposed to him the voluntary termination of his contract. Most of the contractors received the terms favorably: they did not wish to collect money for work not done, even though theirs was the technically legal right to do so. If any producer balked at the policy, he always had the remedy of seeking his full pound of flesh in the Court of Claims. However, the slowness of procedure in the Court of Claims made this a weak remedy; and even if the Court of Claims finally granted him his exactions, then he must wait for his money until Congress passed an act appropriating it from the Treasury. Only recently Congress passed a bill to reimburse the estate of a long-deceased individual who was wrongfully deprived of a horse during the Civil War. Such was the prospect which faced the contractor unwilling to accept the War Department’s terms of settlement. With this coercive potentiality in the Government’s position, the Government itself fixed the terms of settlement, at least in broad outline; but the terms were, in the main, fair to all concerned.

The district boards proved to be able to liquidate most of the contracts without dispute. From these boards the settlement agreements went up for approval first to the bureau claims boards and finally to the War Department Claims Board, with certain exceptions to be noted later. If agreements could not be reached by the district boards, appeals could be taken to the bureau boards and, after them, to the War Department Claims Board. The last-named body designated one of its members to sit with each bureau board and to exercise the authority of the War Department Claims Board in approving all settlements after action by the bureau board. The approval of the special member, acting in the name of the Secretary of War, constituted the final step in the settlement, which then passed to the finance officers for payment. Thus only a few of the 27,000 suspended contracts reached the War Department Claims Board for detailed consideration. Nearly all of them came up to the highest authority as agreed-upon settlements, needing only the approval of the proper special member of the War Department Claims Board before being embodied within the original contracts as supplementary agreements. Occasionally questions of fact arose as to the fidelity of a contractor’s performance under the terms of his contract. Such questions were carried by appeal, not to the War Department Claims Board, but to the Department’s Board of Contract Adjustment, which, it will be remembered, was, by inference, set up as arbiter of such questions by one of the standard contract provisions. The Board of Contract Adjustment had other and more important duties in connection with the industrial liquidation, as will be shown later.

Now this settlement system was able to render an important service to American industry during the demobilization. Many of the contractors had gone to the limit of their resources in procuring buildings, machinery, materials, and work in the prosecution of their contracts. As long as production was continuing, the Government could finance the expansion by making advance payments to the cost-plus contractors and by advancing money to others through the War Credits Board. But when the contracts were terminated, the Government could no longer follow this financing system, and the contractors faced a period of months or even years before they could conclude their settlements with the Government. During all that time their invested money would be tied up. Some of the more deeply involved—and large concerns they were, too—were perilously near actual bankruptcy as a result.

For the relief of such producers the War Department continued in demobilization its plan of advance payments, with, of course, a difference. Before the armistice the Government, in making advance payments, paid a percentage of the cost of work actually done. After the armistice no work to speak of was being done; yet in practically all the settlements there were numerous items of cost admittedly legitimate and about which there was no dispute. These were such items as materials in sight, appraised, and invoiced to the War Department, and such items as the contractor’s obligations to his subcontractors. The War Department adopted the policy of making payments in advance of final settlement up to 75 per cent of its admitted obligations. These payments, amounting in all to more than $143,000,000, enabled the producers to tide over the period between the termination of work and the final settlement with the Government. The practice of maintaining officers of the Finance Service as members of the district claims boards facilitated the prompt payment of these advances. In the final settlements, of course, the Government subtracted from the amounts due from it to the producers all advances made to them.

From this outline it will be seen that the War Department, in striking a balance with war industry, set up within itself what was essentially a system of courts, with a regular procedure and process of appeal and—for such the decisions of the War Department Claims Board came to be—a body of laws and precedents. The court system, however, had the advantage of flexibility, simplicity, and rapidity of action, being hampered by none of the rules and customs that circumscribe the regular courts. The war department courts, if we may call the claims boards that, were courts of conciliation. The claimants partook of their benefits voluntarily. They might, under certain conditions, at any time appeal to the regular federal courts; but there they faced years of litigation before they could reach final settlement. This gave the war department system a great advantage, which the Department utilized to obtain advantageous terms for itself; yet it must be said that the entire liquidation was conducted in a spirit of desire to make the contractors whole for all their expenditures.

We are now in a position to understand the unavoidable injury done to the holders of the informal contracts during the first months after the armistice. When the Comptroller of the Treasury ruled that the informal contracts were invalid, he foreclosed the War Department from making any advance settlement payments to these victims of patriotism and haste. Many of them were as heavily obligated financially as the holders of the valid contracts, and their solvency was equally precarious. Yet not a dollar of government money could they receive until the wheels of legislation had ground out authority for the settlement of their claims. Some of their circumstances were particularly distressing.

Early in October, 1918, one of the war department bureaus ordered a certain manufacturer to produce 5,000 frames for army trucks on the security that “formal contract will follow.” He was awaiting the arrival of this document to justify him in making commitments for materials when he received an urgent message from Washington beseeching him to make early delivery of the frames. He yielded, and without waiting for the formal contract spent over $500,000 for machinery and materials. The armistice was signed before his formal contract was executed, and then, with his production stopped, he was unable to collect a penny of the money due him. Another man spent $400,000 in the prosecution of a contract, only to find after the armistice that his apparently valid contract had been improperly signed and therefore was classed among the invalid contracts.

The Dent Law gave all such claims a legal footing, but that act was not in force until March 2, 1919. Meanwhile, however, the War Department’s liquidation machinery had taken up the settlement of the informal contracts along with the others. The district boards had determined for many of them what part of the work had been completed, what amounts the Government should pay for materials delivered, what reimbursements the producers should receive for expenditures made in preparation for production, and in many instances had reached complete agreements as to final lump-sum settlements. When the Dent Law went on the statute books, these agreements needed only final approval to become operative; and therefore the settlement of the informal claims proceeded with great rapidity after the passage of the enabling act.

The Dent Law conferred upon the Secretary of War power to adjust the informal contracts on equitable terms, with the proviso (already adopted as policy in the settlement of the valid contracts) that no prospective profits should be paid. This power the Secretary delegated to the War Department Claims Board, with two exceptions. Invalid contracts made with Canadian producers were to be adjusted by the Imperial Munitions Board, a branch of the British Ministry of Munitions, which had acted as the agent of the War Department in procuring army supplies in Canada. All contracts with other foreign producers—they were principally French and British producers—were to be settled by various foreign agencies and representatives of the War Department.

The informal contracts with American producers were of two sorts—those of which there was written evidence and those of which there was no written evidence. The former were known as Class A contracts and the latter as Class B. The Class A contracts were contracts apparently formal but improperly executed, or procurement orders, or correspondence setting forth the contract terms. The Class B contracts were agreements wholly or in part oral. The Class A contracts presented no difficulty to the War Department Claims Board, and they were put through to settlement by the regular procedure. It required the taking of testimony to establish the terms of Class B contracts, and the War Department Claims Board, with its subsidiary boards, had its hands too full with the regular routine of liquidation to add to its business this new, voluminous work; and therefore it in turn delegated the duty of establishing the terms of the Class B contracts to the Board of Contract Adjustment, the creation of which was noted above.

The Board of Contract Adjustment heard witnesses and then rendered a decision as to the terms of a Class B contract. After that it did one of two things: it referred the now established contract to the proper district board for settlement, or else it determined itself the financial obligation of the Government and issued an award to the producer. In addition to this work the War Department Board of Contract Adjustment, as a convenient agency, also settled contracts of all sorts made by such presidential agencies as the War Industries Board and the United States Food Administration.

After the Dent Act was in operation, the War Department extended to the informal contractors also the privilege of receiving partial payments in advance of final settlement.

Such, in outline, was the system which liquidated the war industry and struck the balance between the War Department and the munitions producers. A few details of organization should be noted. The War Department Claims Board greatly expanded its own organization during the episode by creating various subsidiary bodies. One of these was its Standing Committee (composed of members of the Board), which did most of the actual work for the Board and presented its acts for the consideration of the entire Board in the form of resolutions. These resolutions in time became a body of precedents to standardize the whole procedure. To handle engineering and other technical questions, the War Department Claims Board created its Technical Section, which, in turn, established within itself its Plant Valuation Group, made up of men specially qualified to appraise the contemporary value of plants erected for the War Department by producers with the understanding that the Department would pay for these plants, or an agreed-upon portion of their cost. The Special Auditing Committee of the Board also conducted a work of great importance. During the war numerous manufacturers held contracts with two or more production bureaus of the War Department. After the armistice they filed separate claims for the settlement of such contracts. There was always danger that in these claims there would be duplicate items of such costs as overhead expense and plant deterioration. The Auditing Committee consolidated the claims of individual producers and thus enabled the War Department Claims Board to strike out duplicate items of cost. Numerous contractors followed the old peace-time procedure of filing claims with the auditor of the War Department. So many claims originated from this source that the War Department Claims Board established in the office of the Director of Finance a Classification Board to separate all claims coming to the auditor and to refer them to the proper bureau boards.

This system had nothing to do with the settlement of claims arising out of the War Department’s operations in real estate during the war. There were thousands of claims for damage done to property incidental to the training of the Army. To settle such claims the Secretary of War utilized the existing War Department Board of Appraisers, which had been created to establish the values of commandeered property. The commanders of military posts investigated the validity of real estate claims and recommended awards. These, after approval by the Board of Appraisers and the Secretary of War, were paid by the auditor of the War Department. Numerous real estate claims arose under informal and invalid agreements, and the condition of such claimants was usually particularly helpless. When the War Department started to build its great trinitrotoluol plant at Racine, Wisconsin, a large number of persons, home owners and renters, moved off the site without the formality of written contracts. Many of these individuals sold their farm animals and household goods. The armistice cut short the construction of the plant, and then the property owners discovered that they were without legal standing before the Government. The Dent Law enabled the Department to settle these and other real estate claims arising under informal contracts, and the Board of Appraisers made the settlements.

The Canadian contracts, both formal and informal, were adjusted by the Imperial Munitions Board, acting in conjunction with two American officers called assessors, one of whom was a special member of the War Department Claims Board. Mr. D. C. Jackling, the director of United States Government Explosives Plants, adjusted all the outstanding contracts and orders in connection with the construction of the Nitro (West Virginia) Powder Plant. More than 3,200 firms and individuals had received orders for materials for the plant, and a fire at the plant immediately after the armistice destroyed the records of all open orders. The terms of these orders were reëstablished by correspondence with the contractors. A special settlement board within the Ordnance Department adjusted the terminated contracts for the construction of nitrogen fixation plants authorized as a war measure. The Spruce Production Corporation of the Air Service terminated and settled its own contracts with the spruce lumber interests in the Northwest.

On July 1, 1920, the War Department Claims Board, which had conducted the liquidation of the Department’s war business (with the small exceptions noted above) ended its work and disbanded, turning over to the regular military organization of the War Department the residue and remnant of work still left. Of the 27,000 war contracts, 26,000 had been terminated and settled by the Department. There were still 995 claims pending, or less than 4 per cent of the original number; but more than half the auditing and other preliminary work on these 995 claims was done. The liquidation was therefore more than 98 per cent complete, and this in little more than a year and a half after the Government halted the mightiest industrial undertaking upon which any people ever embarked. The promptness and wisdom shown in that settlement had allowed war industry to taper off and stop without shock to the economic structure of the country, had stabilized business, relieved the banks of the country of a vast load of debt which they were carrying for the war producers, and thus had brought the nation safely and easily through what might otherwise have been the sharpest business crisis it had ever known. Concretely, in dollars and cents, this work was of great material benefit to the Government and people of the United States. The rate of liquidation of the unfinished portions of the war contracts averaged fourteen cents to the dollar—that is, the payment of fourteen cents by the Government satisfied and wiped out a contractual obligation of one dollar. At this ratio, the settlements effected by the War Department Claims Board saved the people of this country from having to pay out well over $3,300,000,000.