Pentagon Says It Will Back Registration of Consultants

WASHINGTON — The Defense Department, in an apparent policy reversal, told Congress on Tuesday that it would back a system to register consultants in an effort to determine whether they are involved in a conflict of interest by consulting for the Pentagon while peddling inside information to defense contractors.

“Anything that could provide additional information to the contract officer (on consultants) is something we could support,” said Eleanor R. Spector, the deputy assistant secretary of defense for procurement.

Critics contend that the thousands of consultants who advise the Pentagon on defense contracts are able to skirt conflict-of-interest regulations because the government has no formal system of monitoring their activities or whom they represent. The Defense Department initially had opposed a measure that would have established a consultant registry, calling such a move premature and unnecessary.

Now, however, the Pentagon--responding to pressure from Congress for reforms in the wake of the massive investigation into the nation’s defense contracting system announced earlier this year--has decided to support such registration. The Defense Department must “work on the definition of organization conflict of interest. We have tightened up our own rules on this,” Spector said.

Pentagon officials, making their comments Tuesday before the Senate Governmental Affairs subcommittee on federal services, also announced that department auditors have begun a review of 18 defense contractors to determine whether consultants have passed along improper charges.

Last month, the department disclosed that it had audited 12 other top contractors and found that the Pentagon had been charged for $43 million of questionable and improper consulting fees. The department will try to recover $19 million of that, procurement officials said.

None of the firms now being investigated have been identified, but the Pentagon expects to have checked the nation’s 30 largest defense contractors by the time it completes its current review in February, said William H. Reed, director of the Defense Contract Audit Agency. At least a third of those are based in Southern California or have major divisions there.

“We have a lot of potential for conflict of interest,” said Sen. David Pryor (D-Ark.), the author of the consultant registration measure. “I think we have an old-buddy-boy network out there that’s alive and well and has been in a feeding frenzy for years.”

The Office of Management and Budget is examining the possibility of a regulation requiring defense consultants to report their clients, services and credentials to the government. In October, Congress directed the OMB to make a recommendation on such a regulation by March.

The contractors now being reviewed “are spending considerable sums supplementing virtually every in-house activity with professional and consultant services,” Reed said. Among those consulting costs charged improperly to Defense Department contracts in 1986 and 1987 were fees for lobbying Congress and the federal government, for foreign sales costs and for legal defenses against government claims and fraud proceedings, he told lawmakers.

The initial audit of 12 top contractors turned up 10 instances in which the Pentagon was billed for consultants who were used to lobby, Reed said. Defense auditors had referred five infractions to Justice Department investigators, he said, but “they’re so busy that, quite frankly, they haven’t got to us yet to see what we’ve got.”

But Reed and Spector maintained that defense contractors, under pressure from Defense Secretary Frank C. Carlucci and Pentagon auditors, are submitting fewer improper expenses for the department to pay.