Defense Contractors’ Overcharges Cited : House Panel Puts 7 Firms’ ‘Inexcusable Claims’ at $109.7 Million

A team of auditors has uncovered $109.7 million in “absolutely inexcusable” claims against the Pentagon by seven giant defense contractors, the House Armed Services Committee said Sunday.

The bills in question range from the costs of free haircuts for senior company executives of one company to $62,071 for a public relations campaign by another company to counteract negative publicity caused by the crash of an airplane it had built.

The bills were found in audits of one-year billing periods by General Dynamics Corp., St. Louis; the Sperry Corp., New York City; the Newport News Shipbuilding & Dry Dock Co., Newport News, Va.; Bell Helicopter, Fort Worth; McDonnell Douglas Corp., St. Louis; Rockwell International Corp., Pittsburgh, and the Boeing Co., Seattle.

$3.6 Billion in Claims

The auditors examined a total of $3.6 billion in claims for overhead expenses by the seven corporations and concluded, according to Rep. Bill Nichols (D-Ala.), “that up to $1 for every $33 submitted to the government for overhead expenses is questionable.”

“We are finding millions of dollars of absolutely inexcusable claims filed with the government,” said Rep. Charles E. Bennett (D- Fla.). He and Nichols are co-chairmen of the investigation.

“The problem is broader than one company, and the volume of questionable billings already found shows that the problem goes deep--it’s not just a matter of an occasional and isolated wrong bill,” Nichols said.

Bennett said the audit is expected to be completed by mid-May, when hearings are to be held. Legislation is likely to be introduced to “eliminate the incentives that firms now have to charge the Pentagon for everything but the kitchen sink,” he said.

Firm Won’t Comment

“We haven’t seen the report, and, therefore, we can’t comment at this time,” said Alvin Spivak, a spokesman for General Dynamics.

Comment was not available immediately from the other companies.

The committee identified a number of specific questionable or unallowable bills submitted by the seven companies to be charged to the cost of U.S. weapons systems, but refused to identify the firms involved in each specific case:

The billings include:

--$261,000 for an executive dining room where company officials were “fed without charge.”

--$1,099,619 for operating losses of employee cafeterias over a two-year period even though the Defense Acquisition Regulations mandate that the companies must operate food services with the intent of breaking even.

--$10,713 to cover operating losses of a barber shop reserved for senior executives.

--$62,071 “to enhance the ‘public image’ of a firm in the wake of a crash of a plane manufactured by that firm. Costs included those for a news conference, the rehearsal of company officials appearing at the conference, monitoring of newscasts, limousine rental, a clipping service and library research on crashes of airplanes built by competitors.

--$160,000 for taxes paid a foreign government in connection with the contractor’s commercial business.

--$959 for a golf outing.

--$162,149 for promotional giveaways.

--$523 for “entertainment expenses for representatives of the government of Sweden.”

--$100 for an entertainer who “performed a disco.”

Rep. Les Aspin (D-Wis.) told an audience last week that defense contractors routinely bill for such expenses because “the incentives in the system allow these things to happen--and then greed takes over.”