A top Navy official, saying that General Dynamics has strengthened its internal auditing controls, announced Tuesday that the Pentagon has resumed monthly administrative payments to the firm, which had claimed unallowable expenses, including executives’ dog kennel and country club fees.
Everett Pyatt, assistant secretary of the Navy for shipbuilding and logistics, said the government will release about $100 million of $437.8 million that has been withheld since March 5, when Defense Secretary Caspar W. Weinberger ordered the payments stopped.
The remaining $337.8 million represents withholdings by various government agencies for charges still in dispute, Pyatt told a news briefing.
He cautioned, however, that “there is no total clean bill of health” for General Dynamics, the nation’s third-largest defense contractor with about $6 billion in Pentagon billings last year.
The freeze on payments was lifted last Thursday, said Pyatt, who gave no immediate estimates on the amount of the resumed payments. Before the suspension, payments had been $30 million to $40 million a month.
Pyatt attributed the unallowable expense claims to the firm’s “general sloppiness” but said Pentagon auditors “couldn’t trace the blame to a management policy” allowing the practices. Instead, he laid part of the blame on the government’s billing method on overhead expenses--which he called “imprecise” and “ludicrous.” “The game is ‘Catch me if you can.’ General Dynamics isn’t any different than a lot of other” defense contractors, he said, advocating greater use of fixed-price contracts.
Asked what General Dynamics had done to justify a resumption of payments, Pyatt said the firm had created separate accounts to isolate entertainment and other questionable expenses, accelerated its training of employees, required all expense vouchers to be checked by more than one person and certified overhead claims as proper under penalty of perjury.
At the firm’s headquarters in St. Louis, spokesman Fred Bettinger said that General Dynamics “has improved internal accounting procedures, which will assure accurate and legitimate overhead billing of defense contracts.”
He called the Pentagon acceptance of the new procedures “an important step” toward normal business relations with his firm.
Nevertheless, Pyatt told reporters that the Navy is still withholding the processing of about $1 billion in new contracts at General Dynamics’ Pomona division, where 11,000 Southern California employees produce missiles and other weapons, and at the Electric Boat division in Groton, Conn., where Trident submarines are built.
“Some issues have been settled, and some remain to be settled,” he said. He does not know when that ban will be lifted, he added.
Meanwhile, the Air Force further relaxed a ban on awarding new contracts to General Electric Co.'s Space Systems division, according to the Associated Press.
The entire company had been barred from receiving any contracts on March 26, after a federal grand jury accused it of defrauding the Pentagon of $800,000 on a nuclear warhead contract. On April 18, Air Force Secretary Verne Orr narrowed the ban to just the Space Systems division.
On Tuesday, Orr said the ban applies only to the re-entry systems operation, a small component of the Space Systems division where the alleged fraud occurred.