Gen. Dynamics Contract Freeze Lifted by Navy
The Navy on Tuesday lifted a freeze on the awarding of contracts to key divisions of General Dynamics--imposed in the wake of an expense-padding scandal--and immediately announced that the huge defense contractor would get another $1.1 billion in Navy business.
Assistant Navy Secretary Everett Pyatt said that the action was taken after the nation’s third-largest defense contractor set up a “rigorous code of ethics” to prevent future overbilling of the government. At the same time, Pyatt said, General Dynamics waived receipt of $166 million it claimed it was owed to cover bills dating to 1973 that the government subsequently called questionable.
‘Back to Normal’
Navy relations with General Dynamics are “back to normal,” said Pyatt, who blamed much of the company’s problems on confusing government regulations.
“There was no pattern of corruption,” he insisted at a Pentagon news conference. “They were simply doing what our procedures allowed them to do.”
Despite Pyatt’s assertion, Tuesday’s action does not let General Dynamics, which did $6 billion in Pentagon business last year, entirely off the hook. A House panel is scheduled to continue hearings next month into the overbilling charges against the company.
Rep. John D. Dingell (D-Mich.), chairman of the House Energy and
Commerce investigations subcommittee that is conducting the investigation and a sharp critic of both the firm and the military, refused to comment on the latest development.
In March, Pentagon officials suspended payments and began other action against General Dynamics after charges surfaced that the firm had often billed the government for such expenses as country club fees, golf outings and lobbying costs. Even kennel charges for an executive’s dog were submitted to the government for reimbursement.
Gifts for Rickover
The firm, a prime shipbuilding contractor, came under fire also for funneling more than $67,000 in gifts to Adm. Hyman G. Rickover, the father of the nuclear Navy, before he retired in 1982. Navy Secretary John F. Lehman Jr. later censured Rickover and fined General Dynamics more than $676,000 for the gratuities.
Pyatt announced Tuesday that General Dynamics’ Connecticut-based Electric Boat Division was in line for more than $642 million in new Navy contracts, including a $616-million order to build the country’s 12th Trident nuclear submarine. The firm has built or is in the process of building all the other Tridents.
In addition, Pyatt said that the company’s Pomona Division, which employs 11,000 workers in Southern California, would soon be awarded $488 million in contracts for missile production and other activities.
Overhead Costs Paid
Only two weeks ago, the Pentagon, citing improvements in the company’s internal auditing procedures, lifted a freeze imposed in March on payments to cover administrative and overhead costs on existing contracts and released about $100 million.
Pyatt said that the company dropped its claim to $166 million of $2 billion in overhead charges it had submitted to the Navy for work performed between 1973 and 1984 at the Electric Boat and Pomona divisions as well as at corporate headquarters. He said that the company agreed to the action after outside auditors reviewed 97 million expense vouchers submitted to the government.
Although the company had already been reimbursed for most of the claims, the Navy had withheld payments on present contracts in order to cover the disputed funds.
$30 Million in Dispute
General Dynamics is still negotiating with the Navy over whether it should be reimbursed for an additional $30 million in charges for use of the company’s corporate aircraft, Pyatt said.
He said that the Navy’s treatment of General Dynamics should send a message to other defense contractors:
“I hope that the lessons are far broader than what General Dynamics may have learned. I hope the whole defense industry has learned we take these bills seriously, we look at them and we don’t mind going back into history and reopening them if we’re not satisfied . . . .”
