Veto of Bill To Amend the War Contractors Relief Act.

To the House of Representatives:

I return herewith, without my approval, H.R. 3436, an Act "To amend the War Contractors Relief Act, as amended."

In taking this action, I wish to make it clear to the Congress that I am not opposed to legislation which would insure an equitable settlement of the claims filed under the original War Contractors Relief Act. If the Congress will take prompt action on such a measure, I shall be glad to approve it.

The first War Powers Act authorized the Government to provide relief on war contracts when "such action would facilitate the prosecution of the war." Its purpose was not to relieve contractors because of losses, or to insure them against losses. Its purpose was to obtain needed war production.

When hostilities ended on August 14, 1945, a number of Government agencies felt, quite logically, that they could no longer make contract adjustments on the ground that relief so provided "would facilitate prosecution of the war." Accordingly, pending requests for relief were denied even though the facts in particular cases would have justified favorable action if they had been disposed of prior to surrender of the Japanese Government.

I cannot accept the contention that the purpose of the War Contractors Relief Act, which H.R. 3436 would amend, was other than to provide a basis for relief to those contractors whose cases would have been handled under the First War Powers Act if war had not ended. Had I believed there was a broader purpose, I would not have issued the kind of regulations which were promulgated in Executive Order 9786. These regulations were a faithful attempt to interpret the language of the Act as affording nothing more than a statutory basis for the continued processing of written applications for relief under the First War Powers Act which were pending and undisposed of on August 14,

1945. In accordance with the terms of the Act, claims relating to these applications were permitted to be filed until February 7, 1947.

H.R. 3436, and the reports recommending its enactment, would radically change the basic purpose of the original War Contractors Relief Act. I believe that in spite of any administrative interpretation which might be made to limit the effects of the bill, its provisions not only require reconsideration of all claims originally filed, but might also be construed to permit reopening of an unknown number of cases settled under the First War Powers Act and the Contract Settlement Act. This belief is based upon the fact that the bill greatly relaxes the requirements for filing notice, and upon the further fact that the bill permits two new elements of cost which were not authorized under the 1946 Act to be allowed as costs of performance of the contracts and subcontracts. To quote the bill, these elements are "(1) all, or the properly allocable portion, of the sum paid or allowable by the claimant as reasonable compensation for services, during the period of performance of the contracts and subcontracts, to its working partners or working sole proprietor, and (2) interest at reasonable rates paid by the claimant to the date of determination of the claim on sums borrowed by him or if for the purpose of providing necessary working capital for the performance of the contracts and subcontracts."

I do not object to the language which clarifies the intent of the Congress with respect to sums paid as a reasonable compensation for services, but I do find objectionable the inclusion of interest on working capital as a basis for allowing relief. In the first place, it would discriminate unjustly against those contractors who financed their own operations. Secondly, I find nothing in the legislative history to indicate that it was ever intended to authorize the inclusion of such interest as a basis for computing losses and making claims for relief as a result of such losses. In fact, it was certainty upon this point which led to the exclusion in Executive Order 9786 of interest on invested capital as an item of cost upon which losses might be computed.

When this element of interest, relaxation of requirements for filing notice, liberalization of relief beyond that afforded by the First War Powers Act, and the specific exclusion of finality of settlement under the First War Powers Act and the Contract Settlement Act are all added together, I believe that the net effect of this bill for all practicable purposes, would be to write into law the principle of government insurance against all war-time net losses incurred by contractors providing goods and services to the Government.

In my veto message on H.R. 834, 81st Congress, a bill "To amend the Contract Settlement Act of 1944", I stated that the implications of acceptance of such a principle "are profound, both with respect to our finances and with respect to our free enterprise system." I stated further, "In my opinion, it would be a serious error to introduce at this time a new principle--insurance against war-caused losses. This would involve reopening the entire program of financing the war, with incalculable effects upon our finances." These quotations are equally applicable in the case of this bill. If this principle should ever be accepted for those who had contracts with the Government, I would see no basis for withholding its extension to thousands upon thousands of other persons who suffered in producing for the war effort without contracts.

In addition to this major objection to H.R. 3436, I should like to elaborate another point to which I have already referred. There can be no doubt that the bill relaxes the requirement of the original War Contractors Relief Act that requests for relief must be in writing. The last sentence of section (b) of the bill states, "The form of the request for relief hereunder shall be immaterial, provided it inform the Government or the dominant contractor that a loss was being suffered, was anticipated, or had been suffered by the contractor, subcontractor, or subcontractor in connection with the work in question." To authorize the founding of a claim upon any kind of notice and regardless of whether the notice was filed with the Government, would in itself place the Government in a most unfavorable position to protect itself against favoritism and collusion or fraud.

When taken together with the provisions of section 1 of the original Act which authorizes settlement for losses incurred "without fault or negligence", it would place upon the Government the requirement of having to prove fault or negligence in order to deny claims for work which may have been performed as long ago as the fall of 1940. Such a requirement would be wholly indefensible.

It is unfortunate, and I deeply regret that there has been uncertainty and, in the opinion of the supporters of this measure, controversy between the Congress and Executive agencies as to the intent of the War Contractors Relief Act. It is likewise a matter of deep concern to me that I find myself unable to agree with the Committees' reports upon H.R. 3436. The language of the bill standing alone, or when read in the light of the Committees' statements, does not provide an acceptable clarification of the original Act. Therefore, I see no way to approve the Act and depend upon its legislative history to provide an enforceable statement of its limitations.

In spite of my objections to the scope of H.R. 3436 and the principles which I believe it would write into law, I am convinced that agreement can be reached upon what the Government has a clearcut obligation to do. To that end, I wish to repeat that I shall be glad to approve a bill which limits its amendment and interpretation of the War Contractors Relief Act as suggested in this message.

I believe that a bill incorporating the following seven provisions would be fair and would permit equitable settlement of those claims, unsettled at the end of the war, which the Congress feels have been rejected on the basis of "flimsy technicalities."

1. Authorize reconsideration of the claims filed in accordance with the provisions of the original War Contractors Relief Act.

2. Remove the basis for technical rejection by permitting either a request in writing for relief under the First War Powers Act, or a written demand for payment of losses, or a written notice of sustained or impending loss, if timely filed, to be accepted as a basis for claim.

3. Authorize consideration and settlement of the claims of subcontractors on the same basis as the prime contractors if the same kind of written request, demand, or notice was filed with a Government agency, a prime contractor, or another subcontractor prior to August 14, 1945.

4. Permit reasonable compensation with respect to partners and proprietors, thus affording them the same treatment accorded corporations.

5. Preserve jurisdiction of the courts over suits now pending and not require any claimant to start over again in the presentation of his claim.

6. Permit a reasonable time, perhaps sixty days, for amendment or revival of any claim.

7. Include the clarifying definitions of section 7 of H.R. 3436.

Prompt enactment of such legislation will make it possible for the Executive agencies and the courts to discharge the responsibilities which I am convinced they cannot equitably discharge under the measure that I am returning without my approval.

HARRY S. TRUMAN