Audit Finds 95 Overcharged Defense Dept.

Defense Department auditors found that 95 military contractors ran up overcharges totaling $789 million during the last four years, the Pentagon reported today.

Pentagon spokesman Bill Caldwell said $283 million, or more than a third of the overcharge, has been recovered from the contractors.

A report by the Defense Department’s inspector general’s office details audits from July, 1984, through September, 1987, of $54.3 billion in awards to 95 defense contractors. The overcharges were about 1.4% of the total.

The survey was performed because a previous audit found the 95 firms had sold the Pentagon spare parts “at unreasonable prices,” the report said.

‘Recurring Problem’

The latest audit found that “contract overpricing was a recurring problem for the 95 contractors.” Of the 774 pricing actions audited, overpricing was found on 365, or 47.2%, the report said.

The principal reason for the overpricing was that the contractors did not comply with government regulations requiring them to submit accurate cost information for overhead, labor and other costs to Pentagon contractor negotiators, the report said.

The report was compiled by Stephen Trodden, the Pentagon’s assistant inspector general for auditing.

He recommended that regulations be revised to “provide additional guidance to contracting officers to improve the accuracy, completeness and currency of cost and pricing data obtained from contractors.”

Large Contractors

Among the 95 are some of the nation’s largest defense contractors, including Boeing Co., Chrysler Corp., Northrop Corp., Grumman Corp., McDonnell Douglas Corp., United Technologies Corp., Westinghouse Corp. and Hewlett-Packard Co.

One of the founders of Hewlett-Packard, former Deputy Defense Secretary David Packard, recently told Congress that Pentagon regulations had created an environment that made it impossible to implement honest and efficient contracting procedures.

Packard headed a 1985 presidential Commission on Defense Management that recommended changes in these procedures.