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faced by every buyer." Mr. Fleetwood Wilson stated that when in the Army Clothing Department the complaints of contractors being in arrear were incessant." Sir R. H. Knox: "I believe that every large department of business at all times finds its contractors very difficult to deal with; but the contractors themselves have great difficulties in dealing with their sub-contractors, and so on, and delays, you may almost say, necessarily arise; there is a chronic state of it." We need hardly advance further instances of a notorious state of things.

46. When stores are inspected during manufacture, as is the case with most of the more important engineering supplies (such as rolling stock, bridgework, machinery and so on), our Inspecting Engineers watch the progress of the contract and do all in their power to push matters on, reporting to us from time to time.

When we con-

sider that contractors are not displaying sufficient energy we write to them, or, if necessary, see them personally in the matter. By these means we believe that we are as least as successful as any other large buyers in securing expedition, but in spite of all efforts, great delays constantly occur, with consequent dissatisfaction to the Colonies.

47. With articles which are not inspected, or only inspected on completion, the above methods are not available. In such cases soon after the date for delivery is past we write and ask for an explanation from the contractor, who usually, if not in a position to carry out the contract at an early date, pleads unexpected difficulties in procuring the necessary materials, in obtaining suitable labour, or in working to the pattern required.

48. There are two methods of dealing with these cases of delay. One is to terminate the contract, and to give the order to another firm, charging the first with any difference in the price; power to do this has, of course, to be provided for in the contract. This is the "guiding principle" of the War Office. "If a man does not deliver goods in time, and we think his explanation of delay is not satisfactory, we buy in default, and charge him with the extra cost." But this course does not remedy the delay. When the second order is given it is evident that the whole work has to be recommenced, and the consequent delay, even if the second contractor is punctual, may and usually will be greater than if the first orders were allowed to proceed.

49. The other course is to impose a penalty for delay. A penalty clause is in- cluded in our ordinary contracts, and if this provision as it exists on paper could be enforced, it would no doubt have a very salutary effect in the matter of punctuality. There is, however, abundant evidence that it cannot be strictly enforced without either raising prices on future occasions or narrowing competition. A War Office Com- mittee of 1873" went very fully into the question of fines, and said that the imposition of penalties should be discouraged. but the practice substituted rather of buying in default"; in other words, that the contract, instead of being enforced, should be terminated. The Committee of 1901 supplemented the official opinions with evidence obtained from certain railway companies and other commercial houses, from which some extracts may be read with interest: "We do not enforce penalties to any con- siderable extent, or, indeed, at all, when we are satisfied that the contractor has used his best endeavour to forward the work. We find it very difficult to get makers, especially in time of pressure, to agree to penalties without adding considerably to the price or time of delivery, and, indeed. in some cases, such as steel makers, they refuse to agree to a penalty at all. The amount we recover from penalties is compara- tively small."

(Sir W. G. Armstrong, Whitworth & Co., Ltd.) 'Penaltics are not often enforced" (London and North-Western Railway Co.) As a general rule contractors do not care to accept such clauses. In fact, in the present state of the engineering trade, it is quite the exception to be able to insist on penalties being specified with the order. When penalties are specified in a contract they are never enforced if reasons can be clearly shown why the goods have not been delivered in time. If, however, there has been culpable inattention to work, we may inflict a portion of the penalty.

We do not, in fact, enforce penalties to any substantial extent." (Vickers. Son & Maxim. Ltd.). "It is not found practicable to enforce money penalties for default to supply either as regards quality or time." (Great Northern Railway Company.) "In these matters of delay and defaults we rely more often on mutual arrangement and application of ordinary business pressure rather than on penalties and legal remedies. As a matter of fact, contractors are very reluc- tant to accept a penalty clause in their contracts." (Co-operative Wholesale Society. Ltd.)

Probably the extent of these difficulties is hardly known to the Colonial Govern- ments. Sir A. W. L. Hemming, in his reply to the Secretary of State, recognises

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that we may be unfairly blamed for delays which we camiot help. He adds, how- ever, that the anticipated results of ning peccant contractors hardly seems to me to justify the non-infliction of deserved penalties. The range of competition among manufacturers is hardly, imagine, so imited that the refusal of a particular firm to take further orders would cause any very serious inconvenience." It is never, we are afraid, a question of any one particular firm. The full use of the penalty clause would either bring about the successive exclusion of all the firms on the list, or if a firm so fined tendered again, it would certainly greatly increase its price or time.

50. Under these circumstances which we regiet, but which are part, not of our system, but of the commercial habits of the country-what we do is to put pressure on the tardy contractor by calling for explanation and urging expedition, and in all possible cases this is done personally as well as in writing. When the contract is completed the full amount due under the penalty clause is calculated, and the contractor is called upon to state any reason, if he has any to urge, why it should not be paid. On receipt of his reply, we carefully consider what fine can safely in the circumstances be imposed without injury to Colonial interests. If the contractor shows that he has acted bona fide and done his best, the fine is remitted wholly or in part. If he has, in our opinion, shown negligence or bad faith a large part, and, in extreme cases, the whole is imposed. In a matter of discretion like this we can only state the broad principle on which we act, and that every case is fully weighed. On the whole our recent tendency has been to increase the fines, as the exceptional ressure caused in almost all directions by the war has been overcome, but this has to be done with caution, or it may be taken as certain that in times of pressure, such as those which followed the great engineering strike of 1897, our orders would con- stantly be passed by the best firms and we should find ourselves driven to resort to others of a lower class with disastrous results as to both time and quality.

51. These cases of delay of course only occur, so far as manufactured goods are con- cerned, when the articles required are specially made. Small orders of ordinary articles could be obtained from stock, and no delay would be incurred. But if this is done a middleman's charge has to be added to the maker's, and the quality cannot be relied upon with the same confidence as in the case of newly and specially made articles. Our regular practice therefore is to obtain such articles from the makers whenever we are not specially asked to obtain them from stock, and that this course ultimately is greatly to the advantage of a Colony we have no doubt. On the other hand it en- tails a loss of time which may be serious, and no doubt there is often the feeling ex- pressed by the Governor of Jamaica that "the prompt supply of the thing that will serve the purpose is often of greater real value than the long delayed supply of a possibly superior article." If, whenever a Colonial Government sends us an order of this kind, which they wish to have supplied with the least possible delay, they will put on it some such words as "Stock articles" we will obtain the goods if possible from trade stocks. It would facilitate such buying if the Colonial Government allowed us some greater latitude than usual with regard to the description (especially as to di- mensions) and choice of the goods. We should, of course, always endeavour to buy from wholesale warehouses at the lowest prices obtainable, and in the case of small and simple orders the difference of price would probably not be a serious matter. It is more in the specified requirements that difficulties would arise; for instance, ordi- nary articles of crockery, ironware, &c., have often to be badged or marked, and it is not always borne in mind that this process entails a substantial delay in the supply; papers and office books are required of sizes and qualities which are not stocked, and generally articles are often demanded with which a Colony has previously been up- plied, but which have been since superseded in this country by others. If, however, we are allowed liberty to buy the most similar article in stock we could, no doubt, though at some increase of expense, obtain supplies in much shorter time; and we think that the general tenour of the replies points to the more frequent adoption of this course. It appears to us, generally speaking, if we may state our view on this point, that the proper course for Colonial departments is to allow us time to put into the hands of the real makers the main requisitions embracing their coming require- ments, but that any supplementary requisitions intended to supply deficiencies or unforeseen wants might if urgent be supplied as far as possible from stock, or at special price for expedition.

52. Where, practically speaking, the matter rests with us, we should be at no loss to give proof that expedition can be and is shown. Sir R. Moor states, with reference to the stores, supplies, and equipment sent out by us for the Aro Expedition

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PUBLIC RECORD OFFICE

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C.O. 885

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PUBLIC RECORD OFFICE, LONDON

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