It became apparent very early in the history of the contract that because fiscal reports and statements, as prescribed by the AEC, were modeled after those required of AEC On-Continent Integrated Operati Contractors, some of them did not present an adequate factual picture of Overseas A-E-C-M activities. Notable among these was the "Cost Report - Projects in Progress." For example, the Cost Report required that all indirect costs be distributed at the end of each calendar month. Tris requirement resulted in an inequitable distortion of the costs reported for the work under Phase I and in the early construction projects under Phase II. Further, by this method no mobilization costs could be distributed to subsequent major construction projects for the various agencies, all of which benefited from the mobilization program. Therefore, in order to provide a more equitable and realistic dis- tribution of costs for both Holmes & Narver Management and the AEC, it became necessary to revise and supplement the Cost Statements for ready interpretation and analysis. On Jamary 19, 20, and 21, 1950, when the On-Continent Controller and members of his staff attended a meeting at Los Alamos to obtain instructions about additional reporting requirements required by the Joint Technical Planning Committee (the planning prede- cessor of Joint Task Force Three) in Washington, the Controller empha- sized that a seriously distorted cost picture was resulting from seme of the mandatory reporting requirements, such as distribution of all in- direct costs, including mobilization, on a monthly basis. It was also emphasized that this method vould result in absorption of all mobilization cests by the AEC on the earlier increments of work and that construction for the Department of Defense and for other agencies would bear no portion of this major item of indirect cost. Pending decision on this matter and in order to meet the reporting deadline of the l0th of the subsequent month, it was necessary to subwit the "Cost Report - Projects in Progress" for the month of January 1950, on the previously prescribed basis. But discussion of this matter, and of other related accounting and reporting problems, was resumed in the H & N offices in Los Angeles on February 7 and 8, 1950, with the AEC (Los Alamos) Director of Finance, members of his staff, and repre- sentatives of the ARC Controller, Washington, D.C. During these conferences, H & NW was authorized subject to subsequent official confir- mation from Los Alamos, te rearrange Cost Statements and Records te parallel the origtnal estimate, as revised. H & HN was also authorized to apportion indirect costs to Jobs the original estimate ratio of for the initial rates. It was might be adjusted from time te in Progress by predetermined rates, using indirect costs to direct costs as a basis alse agreed that these predetermined rates time, as indicated to be necessary by ex- perience as to their adequacy or inadequacy, without retroactive appli- cation of any rate adjustments. Also discussed was the treatment of H & NW field engineering services as a direct engineering expense, rather than as an indirect construction cost, as would have been the case if the construction contract had been awarded to another contracter. This 11-15