House Panel to Audit Billings by Seven Defense Contractors

The House Armed Services Committee will audit billings by seven major defense contractors to discover the extent to which questionable costs are being added to the price the Pentagon pays for weapons, the panel announced Sunday.

The audit is being organized by two subcommittee chairmen who urged the contractors to follow the lead of General Dynamics Corp.--which recently withdrew $23 million in questioned overhead charges--”before our auditors find unallowable items among their claims.”

45-Day Investigation

Rep. Bill Nichols (D-Ala.), chairman of the panel’s investigations subcommittee, said that a team of 14 auditors from the General Accounting Office and the Defense Contract Audit Agency will examine the contractors’ billings over the next 45 days.

Nichols and Rep. Charles E. Bennett (D-Fla.), chairman of the sea power subcommittee, said that the findings will form the basis for public hearings and that any evidence of wrongdoing will be turned over to the Justice Department for “appropriate action.”

The auditors will examine billings by General Dynamics of St Louis; Boeing Co. of Seattle; the Sperry Corp. of New York City; the Newport News Shipbuilding & Dry Dock Co. of Newport News, Va.; Bell Helicopter of Fort Worth; the McDonnell Douglas Corp. of St. Louis, and the Rockwell International Corp. of Pittsburgh.

Bennett said that the seven contractors were chosen as a representative cross section of the defense industry and not on the basis of any suspicion of wrongdoing.

Questionable Costs

However, a number of the companies already have been identified by Pentagon auditors as charging questionable public relations overhead costs to their government contracts.

According to estimates by the Pentagon audit agency, defense contractors have been charging the Department of Defense about $140 million a year in public relations costs, some of which are allowable under government regulations while others are not.

But the audit agency already has pinpointed millions of dollars of questionable billings, some for promotional “giveaways,” some for parties, dinners and receptions, and some for political contributions.

Sen. Charles E. Grassley (R-Iowa), appearing Sunday on CBS-TV’s “Face the Nation,” called defense industry waste “a cancer,” and recommended more competitive bidding on weapons contracts.