“SHADOW” FACTORIES

Wairarapa Times-Age, 21 June 1938, Page 5

“SHADOW” FACTORIES

MEETING CONSTRUCTION COSTS OF AIRCRAFT. GOVERNMENT'S CONTRIBUTION. Firms which undertook to run ■‘shadow’ aircraft factories will receive £3OO as management fees for each aeroplane produced, the Government paying the net cost. This was revealed (says "The Times”) in the report of the Comptroller and AuditorGeneral (Sir Gilbert Upcott) on the Air Services Appropriation Account for the year ended March. 1937. The report says that in 193 G six firms, engaged with one exception in the motor ear industry, undertook as agents of the Air Ministry to erect, equip, ami manage factories required, first, for the immediate production of airframes and aero-engines in supplement of the output of the aircraft industry, and, secondly, as a potential source of supply in an emergency. Five of the firms are responsible for the production of different components of a fixed ■ number of aero-engines which are to be assembled by one of these five and by the sixth firm. Two of the firms are, in addition, producing a fixed number of complete airframes.

The Secretary of State contracts to .repay to the agents the net cost, which is defined in the agreements as the actual net cost properly incurred, having due regard to economy and efficiency and subject to all discounts, 'rebates, etc. The net cost is not to include any payment in respect of the services of the directors or of the heads of such departments of the firms as may be agreed. The agents are remunerated by management fees which take the form of (a) fixed amount payable in respect of the construction period, and (b) a sum of £2OO or £225 per airframe and £75 per engine produced. An incentive to economy in production is provided by a bonus scheme under which the agents will receive a share (ranging from 121 per cent to 171 per cent) of the sum by which ascertained net cost, is less than a basic price. The basic price is to be mutually agreed if possible following the costing of one or more of a fixed number of “batches” of airframes or engines produced. The agents may be called upon to maintain the factories, when production has ceased, at a fee to be agreed, and are given certain options either to buy the factories if offered for sale or to undertake management in the event of the resumption of manufacture. Any disputes are to be decided by an arbitrator to be appointed; in default of agreement, by the Lord Chief Justice. Except in the dase of one of'the two airframe factories where delay occurred owing to change of site, the factories were begun in July, 1936, and virtually completed in the autumn of

1937. The main heads of agreement were decided at a comparatively early stage and approved by the Treasury Inter-Service Committee, but drafting technicalities delayed formal settlement. The agreements for the engine factories were signed in December, 1937, and the Comptroller understands that the two airframe agreements are expected to be settled in the near future.

The total charge of Air Votes 1936 in respect; of “shadow” factories amounted to £1,418,351, made up of capital expenditure (including the cost of land). £1,114,349; expenditure on jigs, tools, etc., for production, £135,669; and part remuneration for the construction period, £168,333.