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Aviation History
1918
1918 - 0869.PDF
AUGUST I, 1918. manufacture, except in so far as excess profits might be limited by the " reason- ableness " of the. price-charged to the Government and their contractors by the holders of the monopoly. There was no apparent supervision over the extensions and none oil the efficiency and economy of manufacture, while there were com- plaints of the quality of the product. On the other hand, assistance to a quite unusual degree had been granted by the Government to the company, and must continue to be so granted, in order that supplies may be obtained which are essential for the conduct of the war. To some extent the position has been improved by the cancellation of the agreement with regard to the refund of expenditure, but, through this agree- ment and the refusal of the Supply Branch to consider alternative offers of manu- facture in the summer and autumn of 1917, the company are already in possession of a complete monopoly. Since the new agreement has not yet been worked out, it would be injudicious to comment in detail upon its terms, but it should suffice to say that, in the opinion of the Committee, it is unfavourable to the Ministry, perhaps because they were embarrassed by the existing circumstances. Any payment based on cost is unsatisfactory when there is neither any supervision over the process nor comparison with other factories. The fixed rate of profit is based upon a cost which includes materials at a quite artificial price, and is the same whether those materials are obtained elsewhere or are made by the company themselves. Since the materials account for from 50 per cent, to 75 per cent, of the estimated final cost it is obvious that a profit which is generous when their manufacture is included in the cost is quite excessive when they are supplied by the Government. Moreover, the Ministry are obliged to pay depreciation on a generous scale, calculated on the original cost of a plant which is certainly in excess of their stated minimum requirements, and since it has been erected without any supervision by them, may well be conceived on an ex- travagant scale. On these considerations alone the Committee would recommend that the factory should be taken over by the Government ; but apart from this, the reliance by the Government on one source for material required for the prosecution of the war, the assistance already given by the Government to the firm, and the necessity to continue that assistance in the future make it necessary that the complete control of the factory should lie in the bands of the Govern- ment themselves. Only in this way can they secure that the material will be produced in the quantity required and in the most economical manner. Above all, it is only if this factory is in Government hands that experiments towards the improvement of manufacture and alterations in the material can be intro- duced, and that the benefit of such improvements can accrue to the nation. In view of these considerations, the Committee are strongly o* opinion that the ownership of the factory should immediately be taken over by the Government, and the works completed as far as is necessary, and managed by • hem. A Technical Committee should be appointed to consider the best use of the works, and to advise upon the necessary steps foT the completion of the factory and its efficient management. The compensation payable should be determined on the same lines as in the case of other properties taken over for war purposes. The Committee arc of opinion that the branch of the Ministry which is best qualified to manage these works is the Explo'sives Department, who already have control of acetic acid and of all the other chemical ingredients for cellulose acetate and the solvents, and who have officers with the necessary qualifications and a record of success in managing similar factories. The Sub-Committee understand that this Department see no obstacle to this course, except the added burden which would be placed on their staff which is already fully occupied. In view, however of the past history of the case the Committee doubt whether the actual manage- ment of the factory would entail more trouble to the Ministry than the present, Arrangement. At the same time it should be considered whether an alternative arrange- ment should not now be made for the manufacture of cellulose acetate in association with the Usines dti Rhone. The quantity could not be large in view of the existing works, but should be sufficient to enable a comparison to be made between the costs of manufacture. An investigation should be made in order that any portion of the British Cellulose Works which is not too advanced should be immediately discontinued, and any plant which might prove serviceable to the other manufacturers be diverted to them. The Sub-Committee understand that one of the firms whose offer to make cellulose acetate was refused also offered to make experiments in its manu- facture, dispensing inter alia with acetic anhydride, which is the most costlv nf the ingredients. This proposal has now been taken up, the Sub-Committee are glad to learn, by the Munitions Inventions Department, who are investi- gating for other reasons the manufacture of acetic acid. The Sub-Committee nnderstan&that very great economies may prove possible through manufacture by this method. They, therefore, urge that it should be assisted in every way possible. The Sub-Committee also understand that considerable economies can be effected by the use of ethyl formate as a solvent in place of methyl acetate, since for the former imported materials are not required, and that experiments at the Royal Aircraft Factory in the production of a pigmented dope may result in the elimination of varnish. They recommend that decisions be arrived at oij both these proposals with the utmost despatch, and that if the decision is favour- able the consequent modifications in manufacture be introduced as soon as possible. On thi ajTiiaistrative side certain features of this unfortunate case may be regarded as exceptional rather than as typical, but the Committee fear that the lack of co-operation between the branches of departments and of continuity in policy shown in this case is not by any means exceptional. The undertaking was begun on a small scale by the War Office. Finding themselves committed to the scheme the Ministry of Munitions enlarged it and again enlarged it in order to meet increasing demands without realising that terms, which might have been justified on the original modest footing, became extravagant, and indeed positively dangerous, when applied on a larger scale. The fact that the com- pany was in possession of exceptional terms with regard to its capital expenditure does not appear to have been taken into account in considering either alternative offers of manufacture or their programme of extension. To some extent this may have been due to changes in the personnel concerned with the negotiations, but to a larger degree it is the result of want of co-operation between the branches concerned. The Supply Branch treated the company as a private venture emploj'ing its own capital. The Contracts Branch were either not fully con- sulted concerning alternative offers and the necessity for extension, or failed to make the situation clear to the Supply Branch or the Finance Branch. Reliance by the Finance Branch on building licences and on applications for priority as a safeguard against the execution of unauthorised schemes proved valueless in the-face of the measures taken by the Supply Branch to secure priority direct and to encourage expenditure without sanction. The Supply Branch neither consulted the Finance Branch beforehand with regard to the greater part of the proposed expenditure nor themselves took any steps to secure that the ex- penditure or the construction was commensurate with their demands. When the matter was taken up by the Finance Branch at a very late stage, after the Sub- Committee had begun its investigations, they found their hands tied by the commitments already incurred by the company. At no moment was the case, considered as a whole by any authority within the Ministry with full information and in all its aspects. In the First Report of the current session the Committee urged the necessity of securing that the Finance Branch of the Ministry of Munitions should be consulted at an early and definite stage regarding the proposals of the Supply Branches for obtaining the products required by the programme, and that, in particular, all proposals involving capital expenditure should be considered by that Branch at the earliest possible opportunity, leaving to the Munitions Works Board the subsequent consideration of structural details. The Financial Secretary of the Ministry bas stated in the House of Commons that steps have been taken to carry out these recommendations. The case of the British Cellulose Company shows the ill effects of the system, hitherto in force, under which the Department which is interested solely in output urges on expenditure without either consulting the financial authorities or itself, considering its economy and necessity. It. therefore, illustrates the urgent need for the introduction of the measures referred to by the Financial Secretary and for securing that they shall be really operative. The case further illustrates very vividly the dangers which are run by the Supply Branches, as was pointed out in the same report, through lack of co-operation with the financial authorities in cases in which criticisms may be brought against them at some future date. A private monopoly in a key industry cannot be instituted at Government expense or with Government assistance without arousing criticism and, if only for this reason, the Supply Branch would have been better advised to have secured the full authorisation of the Finance Department at every step in their negotiations. Summary of Recommendations. The Committee recommend :— (1) That the ownership of the new works of the British Cellulose Company be taken over by the Ministry. (2) That a Technical Committee be appointed to advise upon the necessary steps for the completion of the factory and its efficient management. (3) That the Ministry consider, without delay, the advisability of securing an alternative source of supply of cellulose acetate, for the reason stated above. AVIATION IN PARLIAMENT. Alliance Aeroplane Factory. MR. HOGGE in the House of Commons o« July 23rd asked the Minister of Munitions on what terms Messrs. Waring and Gillow's Alliance Aeroplane Factory has been taken over as a settlement of the recent strike ; and whether i- is proposed to take any others over on the same terms ? The Parliamentary Secretary to the Ministry of Munitions (Mr. Kellaway) : As was announced in an official communication which appeared in the Press .„ , emporarily to managefactory pending the appointment of a new permanent manager. The financial terms of the transfer are not finally settled. The question of taking similar.iction in other cases must depend on the facts in each case. Mr. Roch : Does that mean that this factory is bought out and out by theGovernment ? Mr. Kellaway: The financial arrangements incidental to taking over thefactory have not been completed, and I cannot make an announcement with regard to it. Mr. Roch : Surelv he can say whether it is the intention to purchase out andout ? I am not asking the price. Mr. Kellaway : 1 cannot answer as to that. A good deal would depend onthe conditions as to whether purchase out and out will be adopted. Mr. Roch : Can he say when he will be able to state definitelv what will bedone ? Mr. Kellaway: I should be able to-give a definite reply at the beginnine ofnext week. =0 Mr. Pringle: Can my hon. friend say whether this is taken over under the1 Jctence of the Realm Act or under the Munitions of War Act, or what statutory power is employed for the purchase, and if he can say that he can surely savwhether it is to be purchased ? ^Mr. Kellaway : I believe it will be taken over under the Defence of the Realm Mr. Pringle : If it is taken over under the Defence of the Realm Act is thereany power to purchase ? Mi. Kellaway : My hon. and learned friend is a lawyer, and I am not. Col. Wedgwood : Will care be taken to see that no money is paid for the good- will of the business, and that it is taken simply at its value ? Royal Air Force Depot. MR. CROOKS asked the Under-Secretary for War whether he is aware that at Xo. 1 Stores Depot, Royal Air Force, Kidbrook, a notice has been posted up to the effect that sleeping-out passes are not to be granted to the men ; whether he is aware that some of the men live within easy Teach of the depot; and whether he will make representations with a view to the withdrawal of the notice ? Maj. Baird : The facts are as stated in the question. The rule has been imposed as a temporary measure in the interests of discipline and efficiency. Goldbeater Sldn. MAJ. NEWMAN on July 23th asked the President of the Board of Trade whether he is aware that the casing trade in this country and in America is in the hands of a ring composed of Germans, American-Germans, and Jews of German extraction, that consequently the supply of goldbeater's skins, of which some thousands are necessary for the construction of each lighter-than-air machine, was before the war and for two years subsequently controlled by this ring, who exported the bullocks' offal from which the goldbeater skin is obtained to Germany, receiving in return manufactured goods ; whether he is aware that Germany was thus enabled to construct a fleet of lighter-than-air machines; and what steps he is taking to control this ring's operations at the conclusion ot hostilities, whether the firms composing it are of enemy origin or not ? Mr. Wardle ; I believe it is the case that the trade in question was, before the war, mainly in the hands of Germans, and that quantities of goldbeater skins were exported from the United Kingdom to Germany for use in building air- ships. I am informed by the Admiralty that under the Defence of the Realm Regulations that Department now has control ot the whole United Kingdom trade in goldbeater skin, and no firm can do business in that commodity in this country without a permit. The question of the measures to be taken after the war is being considered in conjunction with the Departments concerned. 867
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