Not even the assurance of an immediate job and the other official inducements which made the road home the path of least resistance could always induce the discharged soldier to go home directly, particularly if he left the demobilization camp with his pockets full of money. Around some of the demobilization centers ranged bands of thieves and outlaws who, having evaded military service, now during the demobilization wore the army uniform and posed as discharged soldiers in order to prey upon the ex-service men. If a soldier leaving the camp listened to their fraternal “Hello, Buddy!” and fell in with them, he usually later found himself fleeced to his last penny. To offset this evil the American Red Cross established a chain of soldiers’ banks at the principal demobilization centers. In these banks the discharged men could deposit their money, drawing it out by check after they reached their homes. The deposits in the camp banks passed $4,000,000 in amount.
In one respect only was the reëmployment campaign unsuccessful. The War Department had hoped to use the demobilization of troops as an offset to some extent to the steady drift of population from American farms to the cities. In pursuance of this ambition the Government distributed among the troops at the demobilization centers nearly 1,000,000 copies of a booklet entitled Forward to the Farm! Why Not? Yet, although most country boys in the Army were willing to return to the farms, the Government could not induce the city dwellers to take up country life. However, it is noteworthy that in June, 1919, when the Kansas wheat crop was in danger for want of labor to harvest it, the reëmployment organization was able to send nearly 50,000 ex-service men into the Kansas wheat country during the harvest at wages of $5 to $7 a day, lodging and board thrown in.
CHAPTER VIII
WAR CONTRACTS
Of all the business activities of the American Government in the World War, none aroused in the business men of America more interest or more concern than the Government’s employment of its function of making contracts with industry for the production and delivery of war supplies. There is little danger of putting too much emphasis upon the importance of the war contract. After the declaration of war, the Government rapidly assumed unprecedented powers over business, until in the heavy productive months of 1918 it occupied a supreme position. The War Industries Board had virtually commandeered all important raw materials and was distributing them at fixed prices. The Government had become the sole dealer in wool; it was closely regulating the prices of, and determining priorities in the use of, such commodities as copper and steel; through the United States Fuel Administration it was in full control of the production, distribution, and use of fuels; and its position was equally monopolistic toward all other important basic materials. Of the labor, the machinery, and the processes which normally manufactured these materials into the commodities of American commerce, the Government had become almost the only employer; only now it had woven these facilities, the industrial facilities of the largest of industrial nations, into the intricate texture of an arsenal. Mechanical industry for private enterprise had almost disappeared. On the day of the armistice the factories of the United States were working practically as a unit in the production of munitions. While the Navy, the United States Shipping Board, and the military missions of the principal Allies were also prosecuting extensive war industrial projects in America, the War Department alone had entered into some 30,000 contracts directly with builders and producers, these contracts upon their consummation obligating the Government to pay out a sum in excess of $7,500,000,000. Of this production, less than half (reckoning it in money value) had been completed on the day of the armistice.
It follows that the instrument which commanded and set in motion all this effort—the war contract—must have been a thing exceedingly important to America. The 30,000 war department contracts, as a body, constituted in themselves the charter under which the preponderant part of American industry existed for nearly two years. As wisdom or unwisdom appeared written into the provisions of the war contracts, so fared well or badly not only the half of the population directly associated with industry, but the other half as well, and the Government, too. As an example, it was charged with some degree of justice that one great class of war department contracts, the so-called cost-plus contracts, was the chief factor in the rapidly mounting cost of living during the war. In other ways also these writings, which defined the terms of existence for American industry, profoundly affected every person in the United States. We may leave to lawyers and economists the discussion of the academic legal questions involved in the war contracts and still find in them plenty of interest common to all.
When an individual person goes out to buy anything, he normally procures it by paying the price fixed by the seller. Business houses, too, commonly follow this custom in procuring their usual supplies. If, however, the individual person or business house is going into some relatively large operation in which he will require goods and services in extensive quantity, then it is customary to ask for bids from those in a position to supply the needs, and to contract thereafter with the concern which offers to supply the goods and services at the best price. The law requires the Government to follow this procedure in procuring practically all its supplies. Each federal department must advertise its needs publicly, giving complete specifications, must call publicly for bids to supply the materials specified, and must allot the business to the one tendering the best bid; provided only that the bidder is responsible and is known to have the ability to produce goods of the quality desired. The courts have held that a contract written under any other conditions is void.
The law, however, permits certain exceptions. The War Department, for instance, is permitted by law to increase the size of a contract already properly made. It can deal directly, without advertising, with a manufacturer who is a sole source of supply, provided that previous advertising has elicited no bids. These exceptions are the reflection of experience in governing, exceptions granted by Congress to the end that the Government’s necessary business may not be impeded by the operation of the legal checks and balances.
Now there was to the federal contracting rule one other exception which was, for our purposes here, the most important of all. The law authorized the Secretary of War to enter into contracts without the formality of advertising and soliciting bids, in the event of a national emergency. We had not yet been a week at war with Germany when the Secretary of War issued proclamation declaring such an emergency to exist. His signature to this document swept away the most serious legal restrictions which circumscribed the War Department’s contracting powers. The hand of the Department had been further strengthened by the National Defense Act (passed in 1916), which empowered the Secretary of War, “in time of war, or when war is imminent,” to command a manufacturer to produce supplies for the United States at prices fixed by the War Department itself; and if the producer refused this arrangement, then the Act empowered the Secretary to commandeer and take over the producer’s business, paying the producer, however, a fair and just compensation.
Competition for the Government’s contracts under the normal procedure would have been fatal to both speed and secrecy in the procurement of war supplies, and therefore the law wisely permitted the War Department to abandon competition in the emergency of war. But, with the safeguard of the competitive bid abandoned, it is reasonable to suppose that the officers of the War Department, if they were faithful servants of the public, would seek to protect the Government against the extortioner by the substitution of other devices not open to the objection either of delaying the war manufacturing program or of betraying its nature and extent. And so they did. And although the methods of applying the protection were numerous, the essence of it was that the contractor was required by the terms of his contract to produce war supplies at cost, plus a profit for himself, the profit being reckoned in various ways. A contract of this sort was known as a cost-plus contract. Contracts of the normal, older sort, in which the Government dealt with the lowest bidder or with a producer with whom the law empowered the federal purchasers to deal directly without competition, were known as fixed-price or lump-sum contracts.
The cost-plus contract was not entirely unknown to American business before the war, but it had been employed only sparingly. The war brought the form into great prominence, since much of the most important war business was conducted on the cost-plus plan. It is noteworthy that the form has persisted to some extent in American private business, and particularly in the building industry, since the armistice.