39 of 46 Self-Policing Employers Studied

Thirty-nine of the 46 corporations that volunteered to participate in a self-policing ethics program for defense contractors are under investigation by the Pentagon’s inspector general for procurement fraud, a top official said Wednesday.

Derek J. Vander Schaaf, deputy Pentagon inspector general, told members of the House Armed Services Committee that the 39 corporations in question have been targeted in about 250 investigations that include allegations of product substitution, cost inflation, fraud and kickbacks.

Vander Schaaf declined to identify the companies that are under investigation, saying only that some of them are among the nation’s biggest defense contractors. “These are very big companies with a lot of opportunity to get into trouble,” he added.

Drive Started in 1986

He said current investigations focus on all but seven of the firms that signed a voluntary ethics contract as part of a defense industry self-policing drive that started in June, 1986.

According to the policy, contractors agree that they will not engage in any illegal activities and that they will report to the Defense Department any wrongdoing among their own employees. Contractors contend that if they are accused of fraud, adherence to this policy can limit potential penalties against them, such as debarment or suspension.

The effort is an outgrowth of the so-called Packard Commission study of defense contracting, which recommended more self-governance by contractors instead of increased Pentagon regulation.

Rep. John R. Kasich (R-Ohio) said the numbers cited by Vander Schaaf are proof that self-policing cannot work. “My mind is almost blown when we talk about this whole self-policing thing,” he said. “ . . . Why should we be reducing our oversight on an industry that has engaged for 100 years in cost overruns?”

Cites Vacancy in Post

Meanwhile, Rep. Les Aspin (D-Wis.), chairman of the House Armed Services Committee, disclosed that the Pentagon’s position of director for contract advisory and support services--the person in charge of regulating contractors--has been vacant for the last 16 months. He said the vacancy is indicative of the Pentagon’s failure to control consultants.

“They sure as hell aren’t regulating anybody if there ain’t anybody in the job,” Aspin said.

Vander Schaaf acknowledged that the position had been vacant since its previous occupant, Dr. Ben Adams, was reassigned to a post with the North Atlantic Treaty Organization.

Consultants figure prominently in the current procurement scandal, and many of the names that have surfaced have close ties to the Navy. Although there are no accepted statistics on how many consultants work for the Defense Department, the Navy is believed to employ more consultants than any other service.

“The Navy hires consultants to write design specifications, review contract bids and do performance reviews,” said Rep. Patricia Schroeder (D-Colo.). “What does the Navy do?”

“Supervise consultants,” Vander Schaaf replied.

He also admitted the disclosure reports that must be filed by former Pentagon officials who go to work in the defense industry are often vague and frequently go unreviewed by the Defense Department.

Agrees With Closer Scrutiny

Vander Schaaf agreed with Aspin and other committee members that the work of consultants should be monitored more closely by the Pentagon. Among other things, he suggested that Congress impose an absolute limit on the amount of money a consultant can accept from the Defense Department.

Inspector General June Gibbs Brown told the committee that her office has reopened an investigation that was closed last March into allegations that former assistant secretary of the Navy Melvyn R. Paisley was part of a conspiracy to limit competition on a $121-million contract for AN/ALR-67 radar receiving sets that went to the Applied Technologies Division of Litton Industries and Singer Corp.’s Dalmo Victor subsidiary.